Africa-focused Kibo Energy on Tuesday signed a binding term sheet with Sanderson Capital Partners for the conversion of the latter’s 2.5% equity interest in Kibo’s 100%-owned Tanzanian subsidiary, Mbeya Development, to ordinary shares in Kibo.

Kibo will issue just over 126.4-million new ordinary shares of par value €0.015 to Sanderson. Following the settlement, Sanderson’s shareholding interest in Kibo will increase from 8.24% to 23.38%.

As a result, Sanderson will be entitled to a 0.3% royalty of future operating profits of the proposed Mbeya coal mine, should it go into production.

Mbeya Development is the holder of Kibo’s 120.8-million-tonne coal resource in Tanzania, under Mbeya Coal, as well as the power project under Mbeya Power.

Kibo is continuing its pursuit of other commercial opportunities for the Mbeya Coal to Power Project (MCPP), which were previously identified during the development of the MCPP. These opportunities now present “very attractive options given the advanced development status of the MCPP”, Kibo said in a statement on Tuesday.

Some of these opportunities include the possibility to develop the MCPP as a dedicated facility for the power export market and/or local private market.

Further, the term sheet also provides for the continuation of Kibo’s $2.9-million forward payment facility, signed between Kibo and Sanderson.

The facility is currently undrawn with the previously outstanding balance having been settled in full in July 2018.

The continuation of the facility also provides the company with the option of short-term funding, as necessary, within the facility limit to enable it to maintain momentum behind its ongoing development work across its African and UK projects, while also examining a range of additional funding options for the company.

Kibo CEO Louis Coetzee said that, following the settlement agreement, Sanderson will now become a “true cornerstone institutional investor in Kibo” and that its shareholding position in future will bring further stability to the company’s ongoing funding position.

“We also see this as a strong signal to the market of Sanderson’s confidence in Kibo’s project portfolio which continues to advance on multiple fronts as we seek to address the critical requirement for energy security in sub-Saharan Africa by becoming a leading regional power producer.”