JOHANNESBURG (miningweekly.com) – A financial optimisation study on the Mbeya Coal-to-Power project’s (MCPP’s) coal mine, in Tanzania, has revealed that, applying an all-in cost margin of between 47.9% and 48.1%, the operation could generate yearly earnings before interest and taxes of between $23.5-million and $23.6-million.
Applying a real discount rate of 5.51%, the best estimated net present value (NPV) of free cash flow to equity ranged from $214-million to $219-million, a cash return on capital invested of 726% to 732% and a project payback period before loan of 2.6 years.
The study further pointed to an equity internal rate of return (IRR) ranging from 131% to 146%, with a project IRR of 54%.
“We are delighted to provide this update showing the outcome of the latest, more detailed work undertaken by our advisers for the MCPP.
“In particular, we are delighted with the confirmation of the NPV range, which is solely in respect of the coal mining component and does not include the significantly larger power generation portion of the project,” commented CEO Louis Coetzee.
He added that the project now demonstrated a low-risk, low capital investment proposition with a high project IRR and short payback period.
“The IRR being substantially above the cost of debt makes it an attractive option to consider project level loan financing. The project’s robust financials will play in Kibo’s favour in respect of the competitiveness and conditions attached to any such loans,” he remarked.