Name of the Project
Mbeya (formerly Rukwa) coal-to-power project (MCPP).

Location
Tanzania.

Client
Kibo Mining.

Project Description
A mining  definitive  feasibility  study (MDFS) on the MCPP has confirmed the Mbeya coal mine as a robust project with strong financial and commercial indicators.

The MDFS comprised the optimisation of the mine design, a detailed mine design based on the results from the restated Mbeya coal resource and the final coal requirement for the Mbeya power station as stated in the power definitive feasibility study (PDFS).

Kibo increased the total mineral resource of the project in April 2016 from 109.2-million tonnes, disclosed in the 2012 resource statement, to 120.8-million tonnes, comprising a measured resource of 20.9-million tonnes, an indicated resource of 88.6-million tonnes and an inferred resource of 11.3-million tonnes.

Results from the MDFS correlate accurately with those of the mining prefeasibility study (MPFS) completed in August 2015, and have reconfirmed the Mbeya coal mine as a robust project with strong financial and commercial indicators.

It has been proven that constant coal production over the total life-of-mine (LoM) can be achieved.

The mining method developed for the Mbeya coal mine has been confirmed as modified terrace mining.

Overburden will be removed by a free dig (truck-and-shovel) method, with coal seam and interburden mining using mechanised continuous surface mining.

The mining project has been assessed for a 28-year mine life, with average coal production estimated at 1.49-million tons over the LoM. The coal will be fed into a mine-mouth thermal power station.

The Mbeya PDFS, completed in May 2016, has confirmed the primary base case recommended by the power prefeasibility study (power-PFS) as the optimal selection for final design of the station, which comprises circulating fluidised-bed boiler technology and 300 MW, configured as 2 × 150 MW units.

The power-PFS production target of 1 840 GWh/y has also been confirmed.

Average coal consumption has been confirmed at 1 497 432 t/y, using run-of mine product from the co-located mine site and within mine design parameters.

Minor technical concerns identified during the power-PFS were eliminated during the PDFS.

Further, based on the recently restated Mbeya coal resource, the PDFS includes provision for near-term expansion of the power station to at least 600 MW.

Jobs to be Created
Not stated.

Net Present Value/Internal Rate of Return
The MDFS has estimated the internal rate of return at 69.2% – a 15% improvement from 53.9% stated in the MPFS – with a payback of 2.4 years  – a 7% improvement from 2.6 years stated in the MPFS.

Value
The MDFS has estimated the peak funding requirement for the project at $17-million a 54% reduction from the MPFS.

The PDFS has confirmed the total estimated project cost of the thermal power plant as well below the cost estimate stated in the power-PFS.

The positive PDFS results will further improve the already strong financial feasibility figures of the MCPP.

Duration
Not stated.

Latest Developments
Kibo Mining has signed a new, redefined agreement with China-based contractor Sepco III, which can now earn the right to become the sole bidder for the engineering, procurement and construction (EPC) contract to build the power plant component of the MCPP.

The agreement, which replaces the existing joint development agreement between the parties, will result in Sepco being awarded the EPC contract in December, subject to its bid proposal meeting the EPC specification defined by Kibo and the project’s definitive power feasibility study consultants, Tractebel Engineering, along with several other conditions outlined in the new contractual agreement.

Sepco will start its refund of 50% of the total development costs incurred by Kibo on the MCPP to date with a fixed first tranche of $1.8-million by August 30, after which the Chinese group will be formally appointed as sole bidder and will have to submit its EPC bid by October 22.

“The EPC specification requires the EPC bid to, among others, be competitive against an international benchmark determined by Tractebel in respect of elements such as price; technical standards; operational, management and financial capability; and capacity.

“The final bid must also comply with international good practice and standards and will, in the final instance, be subject to acceptance by Kibo and its financial advisers appointed to the MCPP,” Kibo CEO Louis Coetzee has said.

The agreement is also conditional on the parties agreeing by September 22 on the final amount of the development costs, the total refund amount and payment due date.

Further, the near-term cash injection by Sepco III, which will no longer earn any equity in the MCPP, will enable Kibo to further develop the project.

Key Contracts and Suppliers
Standard Bank (financial adviser).

On Budget and on Time?
Not stated.

Contact Details for Project Information
Kibo Mining, tel +353 91 865367, fax +353 91 755066 or email info@kibomining.com.