interruption 1 - the people’s board

INTERRUPTION 1 – THE PEOPLE’S BOARD #6

The People’s Board would like to provide an interruption to your life with regard to the ‘Prudent questions’ outstanding with the ‘Real Board’.

I have received correspondence from Mike Meintjes stating as follows;

I confirm that I received your email referred to below. I am working through your queries with management in South Africa and hope to be in a position to respond later this week.

Please remember this is on 'RES time' so allow for several more days. Sorry Mike, if you read this...

On receiving the response(s) I will post in a timely manner.

I have outlined the questions 'the peoples board' has sent the 'real board' below for your reference.

 

Statement 1. We have a prospecting right-Waterberg One (WO) and a Mining right -Ledjadja Coal.  

Question 1

Why was Waterberg One notused as security for the Noble loan?

Question 2

What is the most recent development/update on the Waterberg One license?  

 

Statement 2. All good companies have directors and management with a stake in the business. This suggests confidence not only in the business but their own personal ability to make the company successful.

Question 3

Why has the current management and directors invested NIL to very little of their own personal monies into RES? 

 

Statement 3. If security is provided to Noble over shares in Ledjadja Coal, we assume there is a plan in place, to cover the short-term cash flow needs of RES on the 30^th of June 2018 if this becomes a problem. If no short-term finance has been established, there may be a cash-flow shortfall to cover the repayments and ongoing expenses after June 30^th 2019. If there is a risk finance will not be able to be drawn down from the funding syndicate in a timely manner, or even risk of being, say 1-3 months too late. With Noble having security over our most valuable asset, we can assume Noble is most likely not going to allow further funds or RES to extendt his facility further.  

Question 4

Could you outline our plan for this short-term funding (come June 30^th, 2019) from another third party should funding not be achieved to ensure Noble have no rights call on their security in the first instance.

  

Statement 4. BDO Finance failed to discuss the large opportunity cost of the stake when giving away Ledjadja Coal Pty Ltd.i.e. the value cannot be considered on face value. A loss of shares in Ledjadjacoal could be seen as the entire value of the business. Some commentators have suggested values of the business with a market capitalisation of $500B on finance approval. Given we had finance approved in October 2016. There is no outline of the severity of this offering of security, if we cannot service the loan. Shareholder value may be deemed worthless, should we have to sell the mining right of Ledjadja Pty Ltd. i.e. Noble as a small stakeholder, now has us positioned whereby they can own the entire RES value. A higher cost short term funding (if required June 2019) is better than risking the entire share value. 

Question 5.

Why was this prudent information not outlined in the report, and short-term funding options not addressed further as a means to service current debt with Noble?

 

Statement 5. With regard to our funding syndicate, we understand there is three parties involved with a sum of $530B required.

 Question 6

Could you outline the successful and unsuccessful elements of the funding, how much and who are the funders at this stage?

 

Statement 6. Mr R Lowe resigned in March 2018,he also sold his 2,000,000 in shares.  

Question 7

In line with statement 2 above, do you see Mr Lowe’s action of selling shares as a lack of confidence in either his own past performance, or the current executive/management. Why or why not?

  

Statement 7. The current directors have been directly or indirectly around RES a long time.

Noble were concerned in 2015 over EFIC's involvement in funding so they saw fit to vote out the current board. We have not seen an improvement in funding since this board removal. This is not downplaying the fact that we have seen milestones reached, but there is a critical component of funding underpinning the entire long term viability.

Mr Xate is a director and shareholder of Altius Investment Holdings (Pty) Ltd (Altius). In 2014 the Groupentered into an agreement with Altius whereby a commission is payable for successfully co-ordinating a project debt facility for the main construction activities of the Boikarabelo Coal Mine Project. Mr Xate was not an officer of the Company when the agreement was entered into.  

Mr Molotsane entered intoan agreement with the Group in 2013 whereby he assisted with arranging negotiations in respect to an economic rail freight tariff reduction. Any reduction in the final tariff will be subject to an annual success fee payable following the signing of a contract reflecting this reduced tariff. Mr Molotsane was not an officer of the Company when the agreement was entered into. 

Question 8

Could you suggest why shareholders should vote in existing directors at this annual meeting or going forward, based on past performance (funding being the major concern at this stage)?

Question 9

Could you outline thecosts, feasibility to meet these costs and/or contracts in place with RES in the case of Mr Xate and Mr Molotsane outlined in the statement above.

  

Statement 8. As reported on the 13th SeptemberMarket update funding proposal was to be placed with lender board for approvalby end October 2018, yet at in the same period you advise BDO financial thedate was to end November 2018. This brings with it questions on statements andaccuracy going forward. 

Question 10

With regard to Transparencyand ethics-page 13 annual report-2018. Was this an error in judgement or simply overlooked?

 

Statement 9. On 30 September 2015, Resgen announcedit had entered into a Memorandum of Understanding with Swiss private companyHAB & JPR Privee (‘HAB’), for the provision of funding of the BoikarabeloProject totalling €480 million across two instalments. On 26 February 2016,following a management restructure, Resgen announced it would no longer pursuefunding from HAB and that the arrangement has been discontinued. Understandingthese conditions and terms would better serve shareholders with transparency.

Question 11

What were the terms andconditions of this discontinued arrangement?

Question 12

With hindsight in mind, andloss of Revenue for now another 3 years, would you suggest (even if thisfinance was not perfectly suited to our needs), was this potential finance notin the best interest of shareholders in contrast to the risk we have positionedourselves now with the security we are providing to Noble? Please explain.

Formerly The People's Chair (FTPC)