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 using 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 two 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 colocated 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
In December 2016, following months of talks, Kibo Mining awarded the engineering, procurement and construction (EPC) contract for its MCPP to Sepco III.

The contract was awarded within its time schedule.

“With certainty on the EPC price now we can confidently state that the MCPP is not only definitely viable, but also very robust and that it has exceeded all our expectations to date,” Kibo CEO Louis Coetzee has said.

The final EPC price will now also enable Kibo to finalise the integrated financial model for the MCPP, as well as finalise the power purchase agreements with local government when it concludes its policy changes on the procurement of power projects.

Meanwhile, Kibo Mining has entered into a binding term sheet with UK-based private equity provider Sanderson Capital Partners in December 2016 for a new $2.9-million forward payment facility.

The facility provides for Kibo to be advanced part of the $3.6-million development cost recovery, which is payable to the company by Chinese contractor Shandong Electric Power Construction Corporation III (Sepco III) on achieving financial close for the project. The facility has the effect of forward selling the MCPP at a 20% discount.

The cash payment will be paid in five tranches, with the last one scheduled to be transferred in June 2017.
 
The company will issue new ordinary shares to Sanderson to the value of $732 036 –the difference between the amount of the MCPP and the funds to be provided under the facility – at the volume weighted average price (VWAP) for Kibo shares over the 30 days prior to the date of signing of the term sheet, which was signed on December 21, 2016.
 
Kibo is under no obligation to draw the full amount available under the facility, but will forfeit any payments not drawn against on the due date of the relevant tranche; it will repay to Sanderson the amounts drawn down on the facility on receipt of the MCPP payment from SEPCO III.
 
Sanderson has the right to convert up to £1.5-million of the amount drawn down on the facility into Kibo shares at the 30-day VWAP prior to the repayment date of the total facility amount.
 
In addition, Kibo will also pay a £71 442 corporate advisory fee to the company's broker Beaufort Securities. This advisory fee is payable on signing of the term sheet in Kibo shares at 6.97p for about one-million shares.
 
Kibo CEO Louis Coetzee has said the company is pleased with the facility, as it enables Kibo to create short- to medium-term funding certainty in a market that remains challenging for capital raising.

He says t it has also provided Kibo with a “creative way” of leveraging the deferred Sepco III payment and provide a funding solution with minimal dilution to shareholders.

“The funds which have been made available will satisfy our cash requirements for a significant time, enabling management to focus all its time and energy on bringing the MCPP to a successful financial close as early as possible in 2017. We also aim to conclude the Opera transaction and complete the planned feasibility work on the Imweru gold project as scheduled,” Coetzee has said.

Key Contracts and Suppliers
Sepeco III (EPC contractor) and GE (equipment, technology and services).

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.