Wrap Text
Rukwa Coal to Power Project – Joint Development Agreement Signed
Kibo Mining Plc (Incorporated in Ireland)
(Registration Number: 451931)
(External registration number: 2011/007371/10)
Share code on the JSE Limited: KBO
Share code on the AIM: KIBO
ISIN: IE00B97C0C31
("Kibo" or "the Company")
Dated: 20 April 2015
Rukwa Coal to Power Project - Joint Development Agreement Signed
Kibo Mining Plc ("Kibo" or the "Company") (AIM:KIBO; JSE AltX: KBO), the Tanzania focused
mineral exploration and development company, is pleased to announce that the Company has now
signed a Joint Development Agreement ("JDA") in respect of the Rukwa Coal to Power Project
("RCPP").
Highlights
* Joint Development Agreement signed for the Rukwa Coal to Power Project;
* Development partner confirmed as SEPCO III of QingDao, China, one of the world's largest and
technically most experienced EPC (Engineering, Procurement and Construction) organisations;
* SEPCO III to contribute up to US$3million towards completing remaining Definitive Feasibility
Study work by October 2015;
* Upon successful completion of the Definitive Feasibility Study, the RCPP will be transferred into
a Special Purpose Vehicle in which Kibo Mining will hold a minimum equity position of 85%,
protecting and retaining maximum shareholder value in the RCPP as it develops;
* Under the agreement Kibo is also able to further release value in the SPV by part disposal of its
interest. This will generate cash which can, if required, be used to fund any ongoing RCPP cost
contribution, allowing the project to be operationally self-financing for Kibo;
* Financial Close for RCPP expected by December 2015, with construction mobilisation
commencing during Quarter 1 of 2016
* Construction work expected to commence in Quarter 2 of 2016, with completion and first power
delivered into the grid, expected by Quarter 1 2019.
Louis Coetzee, Chief Executive Officer of Kibo Mining plc, commented: "Kibo Mining is
delighted to confirm that we have concluded a Joint Development Agreement with Sepco III one of
the world's largest, most technically capable and financially robust EPC providers.
This agreement aligns the Kibo team with the technical capability of Sepco III, ensuring the
finalisation of feasibility work and the ultimate design, construction and delivery of the RCPP will
be undertaken in accordance with world class standards.
We are also extremely pleased that Sepco III is contributing funding that is required to complete
the remaining RCPP feasibility study work, which defrays costs for Kibo and demonstrates a
strong belief in the commercial viability of the RCPP.
The structure of this transaction means the original cost of acquisition of the Rukwa Project and
all Kibo's expenditure thereafter will be fully recognised in the Special Purpose Vehicle that will
ultimately hold the RCPP asset. Kibo will get full recognition for the value that has been created
in the RCPP to date, as opposed to a mere recognition of direct expenditure. As a consequence the
RCPP will generate optimal returns for Kibo from any value created going forward. This is the
very reason why the Company held out for so long before it signed a Joint Development
Agreement, since we had to make sure that a Joint Development Agreement on the RCPP rewards
shareholders appropriately for current value, but most importantly secures shareholders' position
for maximum returns on the RCPP's future value.
Kibo and its shareholders will therefore retain a significant interest in the RCPP throughout all
stages of development and thereafter during power revenue generation, providing exposure to the
substantial project valuation upside. The additional optionality in the JDA means that Kibo can
transact over its remaining holding interest to release value in the project, including to cover
feasibility costs or to provide a commercial return for the Company and shareholders.
Engaging with a highly respected EPC partner adds technical capability for project delivery,
providing considerable reassurance for all stakeholders. It also initiates the Company's
commercialisation of the RCPP for shareholders and marks a key point in the RCPP development
for the Tanzanian government and local communities, who will benefit from the life-changing
enhancement of living standards and opportunity this project will provide.
We look forward to working with Sepco III who we have found to be a highly capable, practical
and proficient team."
Joint Development Agreement Overview
A JDA has been signed between Kibo Mining and SEPCO III ("the parties") wherein the parties
have agreed to jointly develop the Rukwa Coal to Power Project. Further information in respect of
the RCPP is provided separately below. (NOTE: Please follow the following link for extensive
background information on SEPCO III: http://www.sepco3.com/profile/columnsId=1.html )
The JDA is subject to finalisation of Due Diligence, including a site visit which is scheduled for
week commencing 20th April 2015.
Subject to the two companies' required internal approvals as well any required governmental
approvals, SEPCO III will invest in equity in respect of the RCPP to a maximum of 17% of total
equity in the SPV which will ultimately hold the RCPP asset as detailed below. This investment
will take the form of a contribution toward the completion of the Definitive Feasibility Study and
all related activities leading in effect to the point of financial close.
Subject to reasonable conditions with regard to the selection of any additional operational or
financing partners, this JDA enables the introduction of new parties to fund, amongst other items,
feasibility study work. Both companies will also be able to dispose of an additional proportion of
its project holding in the SPV in order to raise capital.
SEPCO III will retain specfic responsibility to lead the Power Generation component of the
Definitive Feasibility Study and Kibo Mining will lead the Mining component. It is expected that
the Definitive Feasibility Study across both Mining and Power Generation compents will be
completed by October 2015.
During completion of the Definitive Feasibility Study the partners will collaborate with regard to
identification and review of construction providers and power plant operators to identify suitable
organisations to build and operate the completed RCPP. The partners will also collaborate to
identify, review and confirm the appropriate financing structure for the RCPP construction process
and relevant financing partners. In addition, the Definitive Feasibility work will also include
negotiation and agreement of a Power Purchase Agreement, Implementation Agreement and
Environmental Impact Assessment.
After successful completion of Definitive Feasibility Studies, and assuming the project is deemed
feasible, a Special Purpose Vehicle will be established into which the RCPP will be transferred.
Kibo Mining will hold at least 85% of this SPV and SEPCO III up to 15% of total equity.
SEPCO III will be the sole EPC contractor for the RCPP, subject to the submission by SEPCO III
of an EPC proposal at financial close, which, when independently evaluated, complies with the
following:
* The EPC proposal must be price competitive against international benchmarks for similar
EPC contracts; and
* The EPC proposal must demonstrate international industry best practice standards.
It is anticipated that financing for the RCPP will be available at a 70% debt to 30% equity gearing
ratio. The specific providers of both debt and equity capital will be identified during the course of
2015 but only confirmed during financial close in December 2015. Standard Bank, financial
advisors for the RCPP, will play an integral role in the financing discussions and process.
RCPP Background
Through the RCPP Kibo Mining is seeking to mine a 109Mt NI 43-101 compliant thermal coal
resource, utilising this coal for a mine mouth 250MW to 300MW thermal power station. This
project is in the development stage, with Definitive Feasibility work ongoing. Various reports
have been released on this project in the last quarter of 2014, as detailed below. The project has
the support of the Tanzanian government at all levels as well as the local community, and is a key
component of the Tanzanian National Strategic Energy Plan which is looking to resolve the
shortage of power in the country, notably in the region where the project is located.
RCPP Technical Findings to Date
During Q4 2014 and following the extensive review and analysis of the RCPP by third party
advisors, Competent Persons' Reports were prepared in respect of both Mining and Power
Generation components of the RCPP. These technical findings are summarised below:
Mining Component
Completion of Concept Study Report (Stage 1, Phase 1 of the Definitive Mining Feasibility
Study) for the Rukwa Mineral Resource by Minxcon Projects (Pty) Ltd. Report findings were
announced on 9 December 2014, with highlights including:
Four alternative options identified for project development with the project financially feasible
for all four alternative options evaluated;
Capital Investment of between US$46 million and US$89 million;
Annual coal sale revenues estimated between US$37 million and US$44 million depending on
the selected option;
All-in in Cost Margin estimates of 38% to 45% (equates to an indicative annual margin of
US$14.8 million to US$19.4 million);
NPV of US$116 million to US$141 million at 5.7% discount rate with payback period 3.9 to 4.7 years
Thermal Power Station Component
Completion of Power Pre-Feasibility Report by Aurecon. Report findings were announced on 18
December 2014, with highlights including:
Four thermal plant configurations were assessed with recommendation for 2 X 150
megawatt Circulating Fluidised Bed option to be evaluated at Feasibility Study stage;
Total capital cost estimated at between US$640 million to US$760 million depending on
plant configuration;
Indicative annual power generated (dependent on plant option selected) between 1,841
gigawatt hours per annum and 1,877 gigawatt hours per annum;
High level environmental risk analyses identified no major obstacles to development;
Additional Rukwa Mineral Resource sufficiently large enough to potentially double the
current design size to 600 megawatts or to be used in alternate energy conversion technologies.
Completion of preliminary base case financial model for RCPP by the Company as announced
on 18 December 2014 with highlights including:
Estimated indicative Life of Plant revenues of approximately US$7.8 billion to US$8.4 billion;
Indicative project NPV of between US$230 million and US280 million (at a 15% discount rate);
Indicative pre-tax equity IRR > 23%; and
Indicative post-tax payback of 8 to 9 years
Contacts
Louis Coetzee
+27 (0) 83 2606126
Kibo Mining plc
Chief Executive Officer
Andreas Lianos
+27 (0) 83 4408365
River Group
Corporate Adviser and Designated Adviser on JSE
Elliot Hance
+44 (0) 207 382 8300
Beaufort Securities Limited
Broker
Oliver Morse
+61 8 9480 2500
RFC Ambrian Limited
Nominated Adviser on AIM
Daniel Thšle
Lucinda Alderson
+44 (0) 203 772 2500
Bell Pottinger
Investor and Media Relations
Kibo Mining - Notes to editors
Kibo Mining is listed on the AIM market in London and the AltX in Johannesburg. The
Company is focused on exploration and development of mineral projects in Tanzania, and
controls one of Tanzania's largest mineral right portfolios. Tanzania provides a secure and
stable operating environment for the mineral resource industry and Kibo Mining therein.
Kibo Mining holds a thermal coal deposit at Rukwa, which has a significant JORC compliant
defined resource (See Table 1 below), and is developing a 250-350MW mouth-of-mine thermal
power station with an established management team that includes Standard Bank as Financial
Advisor. Kibo is undertaking a Coal Mining Definitive Feasibility Study and a Power Pre-
Feasibility Study for Rukwa with initial findings to be released in the near term.
The Company also has extensive gold focused interests including Lake Victoria Goldfields and
Morogoro projects. At Lake Victoria, the Company has projects with a 550,000oz JORC
compliant gold Mineral Resource at Imweru Project (See Table 2 below) and a 168,000oz NI
43-101 compliant gold Mineral Resource at Lubando Project (See Table 3 below) in which the
Company holds a 90% attributable interest. The Company is currently undertaking a Definitive
Feasibility Study on its Imweru Project, with Preliminary Economic Assessment study findings
to be released in the near term.
Kibo also holds the Haneti Nickel Project on which the latest technical report confirms
prospectivity for nickel, PGMs, gold and strategic metals including Lithium.
Kibo Mining also holds the Pinewood (coal & uranium) project where the company has signed
a MOU to enter into a 50/50 Exploration Joint Venture with Metal Tiger PLC.
The Company's projects are located in the established and gold prolific Lake Victoria
Goldfields, the emerging goldfields of eastern Tanzania and the Mtwara Corridor in southern
Tanzania where the Government has prioritised infrastructural development attracting
significant recent investment in coal and uranium. The Company has a positive working
relationship with the Tanzanian government at local, regional and national levels and works
hard to maintain positive relationships with all communities where company interests are held.
The Company recognises the potential to enhance the quality of life and opportunity for
Tanzanian citizens through careful development of its projects.
Updates on the Company's activities are regularly posted on its website www.kibomining.com
Technical data
Rukwa Mineral Resource
Table 1 below presents a table showing the Mineral Resource estimate for the Rukwa Coal Project. The
table is taken from an NI 43 101-Compliant Report by GEMECS (Pty) Ltd dated April 2012.
Table 1
RUKWA COAL RESOURCE SUMMARY- GEMECS (Pty) Ltd
SEAM NI 43-101 IN SITU
SEAM THICKNESS CLASS MILLION TONS
S4 1.14 Indicated 2.17
S3U 2.04 Indicated 6.92
S3L 2.3 Indicated 12.63
S2 3.45 Indicated 23.43
S1U 2.48 Indicated 7.34
S1L 2.92 Indicated 17.4
S0 1.08 Indicated 1.44
Total Indicated Resources 71.34
S4 1.31 Inferred 1.38
S3U 2.24 Inferred 2.94
S3L 2.27 Inferred 3.86
S2 3.42 Inferred 7.94
S1U 2.05 Inferred 6.5
S1L 3.15 Inferred 12.83
S0 1.06 Inferred 2.6
Total Inferred Resources 38.05
TOTAL RESOURCES *109.39
*Kibo holds 100% of the Rukwa Mineral Resource
Imweru Mineral Resource
Table 2 below presents a table showing the Mineral Resource estimate for the Imweru Project at a
base case economic cut-off grade for the reporting of the resource of 0.4 g/t. The table is taken from a
JORC-Compliant Report by Tetra Tech EBA dated February 2014.
Table 2
Area Material Classification Cut-off Specific Metric Short Tons Gold Contained Gold
Type (g/t) Gravity Tonnes (t) Grade
(g/t) Ounces (troy)
Central
Laterite Indicated 0.40 2.50 131,000 144,000 1.785 8,000
Saprolite Indicated 0.40 2.50 706,000 778,000 1.387 32,000
Bedrock Indicated 0.40 2.89 1,895,000 2,089,000 1.043 64,000
Total Indicated 0.40 2.77 2,732,000 3,012,000 1.168 103,000
Laterite Inferred 0.40 2.50 685,000 755,000 1.317 29,000
Saprolite Inferred 0.40 2.50 1,047,000 1,154,000 1.040 35,000
Bedrock Inferred 0.40 2.89 7,838,000 8,640,000 1.029 259,000
Total Inferred 0.40 2.82 9,569,000 10,548,000 1.051 323,000
East Total Inferred 0.40 2.70 2,653,000 2,925,000 1.449 124,000
Imweru Property Total
Indicated 0.4 2.77 2,732,000 3,012,000 1.168 103,000
Inferred 0.4 2.79 12,222,000 13,473,000 1.137 447,000
Combined
(inf+ind) 0.4 2.79 14,954,000 16,485,000 1.143 550,000
*Kibo holds 90% of the Imweru mineral resource
* Total estimates are rounded, based on composites capped at 26 g/t gold at Imweru Central and 25 g/t at Imweru East, the cut-off grade is
based on a gold price of US$1,200 and a 90% metallurgical recovery is assumed in calculation of cut-off grade. A base case of 0.40 g/t
has been selected.
** Classification of Mineral Resources incorporates the terms and definitions from the Australian Code for Reporting of Exploration
Results, Mineral Resources and Ore Reserves (JORC Code) published by the Joint Ore Reserve Committee (JORC)
Lubando Mineral Resource
Table 3 below presents a table showing the Mineral Resource estimate for the Lubando Project at a base
case economic cut-off grade for the reporting of the resource of 0.5 g/t Au. The table is taken from an
NI 43 101-Compliant Report by EBA Engineering Consultants Limited (now part Tetra Tech EBA)
dated August 2009.
TABLE3: LUBANDO MINERAL RESOURCE SUMMARY - BASECASE*
Category West Zone East Zone South East Zone Mid East Zone North Total
Measured Resource
Measured Resource(t) 107,900 4,880 16,900 54,440 184,150
Grade(g/t) 1.6 2.52 1.72 2.48 1.95
Total Gold(oz) 5,900 400 950 4,340 11,500
Indicated Resource
Indicated Resource(t) 280,710 18,330 61,000 149,350 509,420
Grade(g/t) 1.6 2.23 1.89 2.73 1.99
Total Gold(oz) 14,500 1,300 3,700 13,120 32,600
Inferred Resource
Total Resource(t) 1,090,000 65,470 209,340 535,330 1,900,140
Grade(g/t) 1.2 1.56 3.34 3.13 2.03
Total Gold(oz) 44,550 3,300 22,500 53,900 124,200
* Kibo holds 90% of the Lubando mineral Resource
* Numbers are rounded. Composites capped at 10.85g/t gold. Cut-off grade of 0.5 g/t gold based on a gold price of US$850/oz
and assumed 100% metallurgical recovery.CIM definitions were followed for Mineral Resources.
Pursuant to the terms of an inherited agreement with Barrick East Africa Exploration LTD (BEAL), Kibo
currently has an effective 90% interest in the Imweru and Lubando Project (and thus a 90% attributable
interest in the Imweru and Lubando Mineral Resources shown in Table 2 and 3 above), with Barrick having
a 10% carried interest up to a decision to mine at which point they have to contribute or be diluted to a 2%
net smelter royalty. BEAL also has a first right of refusal pursuant to which they can buy the 90% interest
in the project at an agreed market related value after completion of a Bankable Feasibility Study. Kibo
remains the operator of the project.
Review by Qualified Persons
The information in this announcement that relates to the Rukwa Coal Mineral Resource is taken from a
report titled "Independent Technical Report for the Rukwa Coal Project, Mbeya Region, United Republic
of Tanzania" dated 19th April 2012 by CD van Niekerk Director and Principal Geologist with the firm
GEMECS (Pty) Ltd. Mr van Niekerk is a Professional Natural Scientist with the South African Council for
Natural Scientific Professions (SACNASP), Registration No. 400066/98 and a Fellow Member of the
Geological Society of South Africa. He has relevant experience and technical qualifications to be a
"Qualified Person" for reporting coal resources to the NI 43-101 Standard
Information in this announcement that relates to the Imweru Mineral Resource is taken from the report
titled "Resource Update for the Imweru Property Geita Region Northern, Tanzania, JORC Competent
Persons Report" dated February 17th 2014 (the "Report"). The Report states a JORC-compliant Mineral
Resource estimate and was prepared for Kibo Mining plc by James Barr P.Geo. and Darryn Hitchcock
P.Geo. Senior Geologist and Geologist respectively with TetraTech EBA Ltd. Both Mr. Barr and Mr.
Hitchcock are registered as Certified Professional Geologists with Association of Professional Engineers
and Geoscientists of British Columbia a recognised professional organisation. Mr Barr as principal author
responsible for the Report has experience in the evaluation and reporting of Archaean Gold projects and is
a "Qualified Person" for reporting gold resources to the JORC Standard. He consents to the inclusion in
this document of the matters based on his information in the form and context in which they appears.
The information in this announcement that relates to the Lubando Mineral Resources is taken from a report
titled "Technical Report on the Lubando property, Mwanza, Tanzania" dated 31st August 2009" (the
"Report") The Report is NI 43-101 compliant and was prepared for Great Basin Gold Rusaf Gold Limited
by Nathan Eric Fier C.P.G., P.Eng. Market Director for EBA Engineering Consultants Ltd and a Senior
Mining Consultant. Mr. Fieris registered as a Certified Professional Geologist with the American Institute
of Professional Geologists, Registration No 10062, and a professional Engineer in British Columbia,
Canada Registration No. 135165. He has extensive experience in the evaluation and reporting of Archaean
Gold projects.
The Company's Exploration Director, Noel O'Keeffe has reviewed the resource reports and the references
to them in this announcement.
Johannesburg
20 April 2015
Corporate and Designated Adviser
River Group
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