Mbeya power project slightly delayed by changes in government

7th October 2016

By: Simone Liedtke

Creamer Media Social Media Editor & Senior Writer

  

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Changes in the Tanzanian government have caused minor delays in Tanzania-based minerals exploration and development company Kibo Mining’s memorandum of understanding (MoU) with Stateowned power utility Tanzania Electric Supply Company (Tanesco). The MoU involves the supply of power from the Mbeya coal-to-power project (MCPP) and, therefore, financial close is required for the agreement’s finalisation.

The Tanzanian governmental elections took place in October 2015 when John Magufuli replaced Jakaya Kikwete as President.

Kibo Mining cannot comment on when the agreement with Tanesco will be finalised, but states that construction of the mine and power plant is scheduled to start in 2017, with the initial goal to deliver power to the grid by the first quarter of 2019.

“[The delay in finalising the Tanesco agreement] will not impact on the overall timeline of first power in 2019. The timetable is achievable relative to comparable projects of a similar scale,” Kibo Mining CEO Louis Coetzee tells Mining Weekly.

He adds that government changes are a concern for the project, but, as the MCPP is critical in alleviating Tanzania’s power deficit, government has supported the project thus far and continues to work closely with Kibo to ensure that the MCPP meets its deadlines.

“The most significant changes have been in the new government’s mission to implement clearer, more transparent policies and procedures. While this is a time-consuming and, to some degree, uncertain period in the short term, we see significant long-term benefits,” states Coetzee.

“We have worked in the country for over 20 years and, therefore, have an in-depth understanding of how it operates. We maintain strong relationships with all levels of government and continue to work collaboratively and cooperatively with it.”

Kibo, which is mainly focused on Tanzania, has one of the largest mineral rights mining portfolios in the country, extending to coal, gold, base metals and uranium.

Further Progress

Kibo has undertaken prefeasibility and definitive feasibility studies on all aspects of the MCPP, which, the company enthuses, have produced strong positive results, highlighting the robust nature of the project. Kibo is now at the integrated bankable feasibility study stage before financial close.

AltX- and Aim-listed Kibo received the first payment of $1.8-million from Chinese contractor Sepco III, the sole bidder for the engineering, procurement and construction (EPC) contract to build the power plant component of the MCPP.

The payment follows the signing, last month, of a new, redefined agreement that enables Sepco III to earn the right to become the sole bidder for the EPC contract in return for refunding 50% of the total development costs on the project incurred by Kibo to date.

The MCPP comprises the development of a 120.793-million-ton coal resource and a 300 MW mine-mouth power station.

The project is located in the Mtwara corridor in south-west Tanzania, 70 km from the regional capital, Mbeya, where government has prioritised infrastructure development for industries including agricultural farm equipment production and fertiliser production from natural gas and Minjingu phosphate.

Kibo explains that the project benefits from significantly developed infrastructure, including extensive road and rail connections, proximity to the national grid and a vast freshwater supply. The company began developing the project in 2012, following the discovery and delineation of the coal resource during the previous three years by members of the current Kibo board and management.

The project will comprise a large-scale opencast coal mine feeding into a coal-fired power station. The Mbeya coal deposit extends over a 48 km in length and has been tested along and down dip to prove the consistent presence of coal. A recent restatement of the resource resulted in a 10.42% increase over the previous National Instrument 43-101-compliant resource estimate to 120.793-million tons.

Kibo notes that 91% of the restated resource qualifies for inclusion in the ultimate reserve statement for the power plant. The coal quality also exceeds the standard technical requirements of the power plant. The resource is based on about 12 km of the coal deposit – enough to feed and sustain the proposed 300 MW power station for more than 30 years.

“The coal seams are outcropping in areas and remain open-ended along depth. The use of continuous surface miners and free digging will remove any need for drilling and blasting during the mining process. It allows for the coal to be mined at the exact fraction size required by the power plant which, in turn, makes washing unnecessary, bringing about substantial environmental benefits and cost advantages,” elaborates Coetzee.

He points out that the power station design is traditional, using proven technology, and is amendable to expansion up to 1 000 MW, owing to a sufficient coal resource from the mine. “The company has also secured three new prospecting licences immediately north, south and east of the resource to secure a long-term fuel supply.”

Additional Focus

Along with the MCPP, Kibo is also focused on the development of its Imweru gold deposit, in Mwanza, near the Shinyanga and Kagera regions, in Tanzania.

Mining Weekly reported in September that Kibo Mining consolidated its Imweru and Lubando gold projects, in northern Tanzania, into a newly renamed company Katoro Gold Mining. This followed the signing of a heads of agreement with London-listed Opera Investment for the unloading of Kibo’s wholly owned UK subsidiary Sloane Developments for 61-million Opera shares of 1p issued at a price of 6p apiece. Opera will delist from the main market of the London bourse and the enlarged-share rebranded Katoro will list on the Aim market, with the board of directors initially comprising three directors nominated by Kibo and two directors nominated by Opera. “Kibo now finds itself in a position where the development of both the company’s advanced gold projects will be fast-tracked with the strategic advantage of an independent ability and capability to fund further development into production,” says Coetzee.

Kibo’s other projects in Tanzania include the Haneti nickel/platinum group metals project, where drill-ready targets have been established, and joint venture projects with LSE-listed investing company Metal Tiger at Pinewood and Morogoro.

Edited by Tracy Hancock
Creamer Media Contributing Editor

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