Name and Location
Mbeya (formerly Rukwa) coal-to-power project (MCPP), Tanzania.

Client
Kibo Mining.

Project Description
The project comprises two prospecting licences and two prospecting licence applications in south-western Tanzania, just south of Lake Rukwa.

The MCPP is expected to deliver 109-million tons of thermal coal over its mine life, with the coal to be fed into a 250 MW to 300 MW mine mouth thermal power station.

A 2014 technical review of the MCPP’s mining component has identified four alternative options for project development, with the project financially feasible for all four alternative options evaluated.

A prefeasibility report on the project’s thermal power station component  recommends the installation of two 150 MW units.

The report further indicates yearly power generation of between 1 841 GWh and 1 877 GWh and an additional mineral resource sufficiently large enough to potentially double the current design size to 600 MW or to be used in alternate energy conversion  technologies.

Net Present Value/Internal Rate of Return
The technical study on the mine project estimates an all-in cost margin at between 38% and 45%, equating to an indicative yearly margin of between $14.8-million and $19.4-million and a net present value (NPV) of between $116-million and $141-million, with a payback period of 3.9 to 4.7 years.

With regard to the thermal power station, indicative life-of-plant revenues are estimated at about $7.8-billion to $8.4-billion.

The power station project has an indicative NPV, at a 15% discount rate of between $230-million and $280-million an indicative pretax equity internal rate of return of more than 23%; and an indicative post-tax payback of eight to nine years.

Value
The MCPP technical report estimates a required capital investment of between $46-million and $89-million and yearly coal sale revenues of between $37-million and $44-million, depending on the selected development option.

The total capital cost of the power plant is estimated at between $640-million and $760-million, depending on the plant configuration.

Duration
Not stated.

Latest Developments
All conditions precedent related to the agreement between Kibo Mining and the Shandong Electric Power Construction Corporation III (Sepco3) to develop the MCPP have been met, allowing the parties to advance development of the 109-million-ton resource and up to 300 MW thermal power station.

The conclusion of the joint development agreement (JDA) will allow the partners to conduct and complete the project’s bankable feasibility study (BFS) “at pace”.

“Kibo Mining is delighted to confirm that the JDA with Sepco3 is now unconditional, funded until completion of BFS and fully operational. This marks another crucial progressive milestone in the development of the MCPP. The execution of the JDA will, henceforth, be Kibo's first priority in the further development of the project.

“With all the most important strategic MCPP enablers now firmly in place, we can resolutely focus our entire effort on the delivery of this robust world-class project,” commented Kibo Mining CEO Louis Coetzee.

According to the terms of the deal, Sepco3’s funding contribution to the MCPP will be implemented as an equity investment to a maximum of 15% of total equity in a special purpose vehicle (SPV), which will ultimately hold the MCPP asset.

Kibo Mining will hold at least 85% of this SPV and Sepco3 up to 15% of total equity.

Sepco3’s investment will comprise a contribution towards the completion of the definitive feasibility study (DFS) and all related activities leading to financial close.

Coetzee notes that the specific providers of the debt and equity capital will be identified during the course of the year but only confirmed during financial close in December. Standard Bank – the financial advisers for the MCPP – will play an integral role in the financing discussions and process he adds.

Sepeco 3 will retain specific responsibility to lead the power generation component of the DFS, while Kibo will lead the mining component.

The DFS across the mining and power generation components is expected to be completed by October.

During the DFS, the partners will identifiy suitable construction providers and power plant operators to build and operate the completed MCPP.

The partners will also collaborate to identify, review and confirm the appropriate financing structure for the MCPP construction  process.

Kibo has indicated that in addition to the DFS, work will also include negotiation and agreement of the terms of a power purchase agreement, implementation agreement and environmental-impact assessment with the appropriate Tanzanian government bodies.

Sepco3 will be the sole engineering, procurement and construction (EPC) contractor for the MCPP, subject to its submission of an EPC proposal at financial close, which, when independently evaluated, is expected to be price-competitive against international benchmarks for similar EPC contracts.

The EPC proposal will also be required to demonstrate international industry best practice standards.

Key Contracts and Suppliers
Standard Bank (financial adviser).

On Budget and on Time?
Not stated.

Contact Details for Project Information
Kibo Mining, tel +353 91 865367, fax +353 91 755066 or email info@kibomining.com.