Africa-focused energy and resources firm Kibo Mining (LSE:KIBO) recovered some of its recent losses today after announcing a significant development in the production of its flagship coal asset in Tanzania. Kibo saw its shares spike 9.9pc to 5p after announcing it had awarded its Chinese development partner Sepco III a contract to build a power line at the Mbeya Coal to Power Project (MCPP).
This line will be used to move power from the Mbeya Power Plant in Tanzania’s Songwe District to the Mbeya sub-station, which is operated by the Tanzania Electric Supply Company (Tanesco). The decision to award the contact followed four weeks of discussions between Kibo and Tanesco on the development of a power purchase agreement for the Mbeya project. Kibo and Sepco agreed that sufficient progress had been made with the discussions and decided to move ahead with the construction of the power line.
Louis Coetzee, chief executive of Kibo, said: ‘We are delighted to continue working with Sepco III as our designated EPC (Engineering Procurement and Construction) partner. The signing of this second lot of the EPC is the conclusion of discussions with Sepco III that occurred last week in China, during which several strategic decisions were taken with regard to the further development of the MCPP as well as our future strategic co-operation with SEPCO III.
‘Together with all our development partners, we are working all hours to complete the PPA (power purchase agreement) as soon as possible. Over the past few weeks, we have once again been reminded of the significant importance of the MCPP, both as a strategic energy project as well as a socio-economic development project, and how critically important it is to spend enough time to make sure that we get it right the first time. The PPA process is in a very sensitive phase of its development, and this requires the utmost patience, consideration and discretion from all stakeholders.’
After hitting highs of 7p in March, Kibo’s shares have declined recently thanks to the ongoing discussions with Tanesco, which have thrown up questions Mbeya’s development timeline, and a £1.5m placing. The business was also recently hit by the insolvency of Beaufort Securities, having carried out a £750,000 placing with the former broker just days before it was shut down by the Financial Conduct Authority. The firm has said it will provide an update on this situation as soon as more information is available and expects to receive all of its funds.
Kibo is a multi-asset resource development and energy company with a long-term goal of becoming a leading power producer in Sub-Saharan Africa. The company aims to tackle the power deficit which is severely hindering economic development in the region.
The Mbeya Coal to Power Project comprises the Mbeya Coal mine, a 1.5Mt per annum mining operation and the Mbeya Power Plant, a 300MW mine-mouth thermal power station with a long-term target of 1000MW. The Mbeya Coal Mine has a defined 120.8Mt NI 43 101 thermal coal resource, and a definitive feasibility study has been carried out on the resource to confirm an initial rate of return of 69.2pc. An integrated bankable feasibility study for the project showed potential revenues of $7.5-8.5bn over an initial 25-year mine life, and a construction period of 36 months.
As of last month, Kibo also has an 85pc interest in a nearly identical power project in Botswana The Mabesekwa Coal Independent Power Project currently has an in-situ 777Mt Coal Resource and has water and land use permits and environmental certification in place. A pre-feasibility study and scoping study have been completed on the mine, revealing a maximum capacity of 600MW based on a coal delivery rate of 3.2Mtpa and a life of mine of over 30 years.