Tanzania-based minerals exploration and development company Kibo Mining will complete the integrated mining and power definitive feasibility study (DFS) for its Mbeya coal-to-power project (MCPP) by the end of the year, provided there are no unexpected delays, the company says.
Kibo completed the mining prefeasibility study (PFS) for the project, previously known as the Rukwa coal-to-power project, last month, while the PFS for the power plant portion of the project was completed in December 2014.
“We are delighted with the results from the mining PFS, which have surpassed all expectations. Figures . . . confirm that the Mbeya coal mine – as the mining component of the MCPP – is . . . robust . . . in every aspect,” says Kibo CEO Louis Coetzee.
The completion of the DFS will enable the company to start financial close by the end of 2015, which it hopes to complete during the first quarter of 2016.
“Completion of financial close by the end of the first quarter in 2016 will enable us to start with construction somewhere during the second half of 2016, with first power delivered to the grid by the first quarter of 2019,” he adds.
The company states that it is important to note that this timeline will always be subject to change, owing to the complexity and magnitude of the MCPP.
Kibo notes that there are numerous external influences, such as the negotiation and finali- sation of the power purchase agreement and grid connection agreement, on the timeline, over which it has very little or no influence.
Total capital expenditure for the MCPP (mine and power plant) is estimated at between $800-million and $900-million, and it is expected that the project will create between 700 and 800 direct employment opportunities, with about four to five times as many indirect employment opportunities.
The project’s yearly coal sale revenue is expected to amount to between $48.4-million and $48.6-million.
In addition, Coetzee says the project’s all-in costs (AIC) margin and net present value (NPV) ranges are “particularly impressive, given the prudent assumptions applied”.
According to the PFS, in terms of the mining element of the MCPP, the project’s AIC margin is expected to be between 49% and 62%. Applying this margin, Kibo expects a yearly profit margin of between $24-million to $27-million.
Applying a real discount rate of 5.5%, the best estimated NPV ranges from $211-million to $244-million, evidenced by the use of coal pricing significantly below the current market price, which further reflects the robust economics of the project. This is also reflected in the strong return on investment figures.
The project’s internal rate of return is estimated at between 33.6% and 53.9%, while the return on investment ranges between 595% and 903%. The payback period is expected to be between 2.6 and 3.65 years.
The mining PFS also delivered decisive results on technical and environmental levels. Kibo notes that using continuous surface miners has proven to be a viable option, as it made any coal washing unnecessary, which frees the project of a very expensive and onerous environmental liability.
Further, free digging will eliminate the use of any explosives, which improves mining efficiency and effectiveness significantly. However, the environmental impact is the most important, compared with the mining efficiency of surface miners.
“The fact that we also do not have to do any river diversion is a further significant positive environmental impact,” adds Coetzee.
About Kibo Mining
Kibo Mining is listed on the Aim, in London, and the AltX, in Johannesburg. The company focuses on the exploration and development of mineral projects in Tanzania, and controls one of Tanzania’s largest mineral rights portfolios.
The company believes that Tanzania provides a secure and stable operating environment for the mineral resource industry and for Kibo Mining.