Aim-listed energy provider Ncondezi Energy in March reported that, following a detailed review of its budget and the implementation of cost-saving initiatives, the company’s management was confident that it had sufficient cash to support ongoing operations until the first quarter of next year.

The company revealed that, as of February 28, it had $3.7-million cash on its balance sheet. Ncondezi is in the process of preparing for commercialisation as it approaches its 2016 deadline for meeting power plant stockpile ahead of its 2018 deadline for commissioning at its Ncondezi coal project, in Tete, Mozambique.

Further, Ncondezi announced that it had received official notification from the Ministry for Coordination of Environmental Action regarding the approval of the environmental- and social- impact assessment (ESIA) for the 92 km transmission line that will connect the Ncondezi project to the Mozambique national grid.

This follows ESIA approvals that had already been granted on both the mine and power plant. The $376-million project is part of the 38 700 ha Ncondezi licence area located in the coal-bearing Tete province, which is one of the largest undeveloped coal mining regions in the world.

The project boasts a total Joint Ore Reserves Committee-compliant resource of 4.7-billion tons. The power plant will be located about 90 km from the local transmission network and can be expanded to a capacity of up to 1 800 MW.

Part of the 300 MW integrated thermal coal mine and power plant project is the Ncondezi mine. The Ncondezi mine will be an openpit operation, targeting production of 1.5-million tons a year of saleable product to the proposed mine mouth power plant, at an average yield of 92% and an average strip ratio of 610-million cubic meters a ton using contractor mining.

SEP Agreement
Ncondezi Energy in October last year signed a nonbinding memorandum of understanding (MoU) with the Chinese-based Shanghai Electric Power Company (SEP) that could result in SEP becoming the controlling shareholder of Ncondezi’s 300 MW power plant project and a minority shareholder in the Ncondezi mine project.

Under the MoU, the joint venture agreement heads of terms will outline a transaction, whereby SEP acquires a controlling equity stake in the power project, as well as a minority interest in the associated Ncondezi mine project.

Other Developments
Mining Weekly in March reported that Ncondezi Energy had been granted an extension for meeting certain conditions relating to the conditional commercial deal signed between it and Electricidade de Moçambique (EdM) for its 300 MW power plant.

According to the report, following discussions with EdM and progress made on the power project, EdM formally agreed to extend the deadline for the conditions precedent. The extension was granted with the longstop date of September 30, and was subject to a number of conditions.

The conditions include that Ncondezi reach a binding agreement with a strategic investor acceptable to EdM and that Ncondezi be the key responsible party for the development, con- struction and operation of the power project.

The conditions also stipulated that Ncondezi had to obtain bankable environmental planning and management and operations and maintenance agreements for the power plant, mine and common infrastructure, while setting up an agreed timetable between EdM, the strategic investor and Ncondezi to finalise the key commercial agreements, namely the power purchase agreement, power concession agreement and the coal supply agreement.

The agreed commercial deal included the range for the starting electricity tariff to be paid by EdM, which would then be subject to adjustments during the 25-year operational life of the project. The starting tariff range was based on a number of assumptions, including indexation, financing costs, coal costs, operator and maintenance costs and the technical parameters and capital costs contained in the binding power plant engineering, procurement and construction bids.

Based on a target project capital structure of 70% debt and 30% equity, Ncondezi said that, at the time of the report, it believed that the conditional commercial deal supported the economics of the Ncondezi power plant and provided a regionally competitive dollar-based project equity and international rate of return.