JOHANNESBURG – Kibo Mining on Thursday said it had signed an advisory engagement letter with Absa Bank laying out the scope of work and terms under which it will act as financial advisor on the Mbeya Coal to Power Project (MCPP).

Kibo is developing a 250 MW to 350 MW mouth-of-mine thermal power station in its power and coal mine elements in south-western Tanzania.

Kibo was previously advised by Standard Bank on the Mbeya power plant project.

The mining company said Absa was prepared to take an equity stake in the MCPP in lieu of the standard cash retainer fee on completion of the project.

The Tanzania-focused mineral exploration and development company said the scope of work in the mandate required the advisor to assist in delivering the project to a successful financial close.

Among other things needing completion is the development of a financial model for the project with the assistance of the company and its technical advisors and partners, and the development of a comprehensive and optimum funding structure for the project.

Kibo has been successful in negotiating a minimal cash retainer fee in return for granting the advisors equity call options of 3.5% of the total share capital of Mbeya Development Company.

Kibo said the terms of the advisor options would be formalised in an option agreement within three months of the commencement date of the mandate.

Louis Coetzee, chief executive of Kibo Mining, said he was “extremely pleased” with having Absa on board as the new financial advisor to the Mbeya Coal project.

“Absa/Barclays will replace our existing financial advisor, Standard Bank, for the very important financial close phase of the MCPP,” Coetzee said.

“We are glad to report that the transition to Absa will be seamless and will not result in any delay or additional budget cost towards completion of the Integrated Bankable Feasibility Study for the project.”

Coetzee said Kibo was looking forward to benefiting from Absa’s impressive record of bringing projects similar to the MCPP to a successful financial close.

Earlier this month, Kibo signed a memorandum of understanding with General Electric (GE) to supply equipment, technology and services to the Mbeya power plant, and also appointed Norton Rose Fulbright as legal advisers.