UK-based energy producer Edenville Energy announced in February that its subsidiary Edenville International Tanzania Limited (EITL) has entered into a contract with coal handling services company Nextgen Coal Mine for the operation of the company’s Rukwa coal project, in Tanzania.
The contract is for an initial period of one year from February 1, 2022, and supersedes the coal mining agreement with Tanzanian incorporated company Infrastructure and Logistics Tanzania and the sales and marketing agreement with professional services provider MarTek Global.
The agreements with Logistics Tanzania and MarTek Global were announced by EITL on June 8, 2020, and August 26, 2020, respectively, and have subsequently been terminated by Edenville.
Under the agreement, Nextgen will pay EITL a royalty of $10/t of washed coal sold and a royalty of $5/t of any coal fines sold.
Nextgen intends on using existing EITL employees and equipment where appropriate, as well its own, to increase production, sales and ultimately the profitability of operations.
Nextgen will be responsible for taking over operations with immediate effect to improve efficiency, however, project ownership will remain with EITL.
Additionally, Nextgen will also be responsible for all operational and maintenance costs relating to the mining and production of washed coal at Rukwa, as well as all taxes, duties and royalties related to coal sales and the licence extension costs.
Notably, Nextgen is a newly formed special purpose vehicle established specifically for this venture.
The principals behind Nextgen are also the founders and owners of Tanzania-based specialist logistics and haulage firm Tuxford Haulage Limited, that has been in operation since 2017.
In December, about 803 t of washed coal were processed through Edenville’s wash plant.
This decrease from the November figure of 1 125 t reflected shutdowns over the Christmas and New Year holiday period.
There was limited production of washed coal in January 2022 as Edenville focused on concluding the agreement and the expected handover to Nextgen.
With Nextgen having now taken over operatorship, Edenville expects production to increase.
“We are very pleased to have entered into this agreement with Nextgen, whose owners have extensive experience in the coal sector and a network of relationships throughout Tanzania and surrounding countries,” says Edenville CEO Alistair Muir.
He adds that, with Nextgen absorbing the costs of production, Edenville’s Tanzanian operations will now become profitable immediately with respect to any coal produced and sold from Rukwa.
It is expected that Nextgen will originate new customers of Rukwa coal, especially given the increasing demand both within Tanzania and the surrounding regions, to complement the established existing and potential order book.
“With the operational side of Rukwa in safe hands, the company continues to review additional investment and operational opportunities, following its recapitalisation last year,” Muir concludes.