13th Jan 2016 10:06
LONDON (Alliance News) - Kibo Mining PLC on Wednesday said it has expanded the licence area of the Mbeya coal-to-power project in Tanzania after being awarded three new licences that surround the existing project space.
The 109.0 million tonne Mbeya project will produce a coal-to-power a station within the country to provide electricity to the domestic market. The size of the licence area has now been increased after Kibo's wholly-owned subsidiary was awarded three new licences which have been consolidated into the project.
The three new prospecting licences lie to the north, south and east of the existing licence area and expands the company's ground position in the country.
In the short term, the new prospecting licences will further enhance the bankable feasibility study and subsequent development of the project, and in the longer term provide the company with significantly increased exploration potential, Kibo said. The new prospecting licenses will provide the company with the ability to test for extensions to the resource and provide the opportunity to discover additional satellite coal deposits.
Louis Coetzee, chief executive of Kibo said: "This is of significant strategic importance as it secures the long-term fuel supply to the power station, provides confidence that the power plant can ultimately be expanded to 1,000 megawatts and allays any fears from long-term investors about possible instability in the long-term fuel prices, at which the power station will be able to procure fuel for the power plant."
The power plant at the project will initially have a power generation capacity of 250 to 350 megawatts, with Kibo hoping the new licence areas can help expand the resource to allow the plant to be upgraded in the longer term.
On Monday, Kibo said it was finalising a memorandum of understanding with Tanzania Electric Supply Co Ltd on a power purchase agreement for the project, which was formerly named the Rukwa project after the main coal deposit.
The financial optimisation study for the coal mine released in October showed the mine had the potential to generate earnings before interest and tax of around USD23.5 million per year with a 28-year lifespan, producing 1.5 million tonnes of coal per year to generate annual revenue of around USD48.4 million.
The best estimated net present value of the mine stands between USD214 million and USD219 million with an internal rate of return of 54%.
That study was based on funding the project 70% by debt financing and 30% through equity with a peak funding requirement of just over USD37.9 million, which will be spent all within the first year of development, comprising USD26.5 million in loans and USD11.4 million in equity.
Kibo shares were trading up 1.0% to 5.05 pence per share on Wednesday morning.
By Joshua Warner; [email protected]; @JoshAlliance
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