A subsidiary of Aim-listed Edenville Energy has entered into a coal mining agreement with Infrastructure and Logistics Tanzania Limited (ILTL), a privately owned Tanzanian company with a focus on infrastructure development, logistics, mining and marketing.
The agreement, which will become effective once business activity can return to normal in Tanzania, covers the full operation of mining and processing activities at Edenville's Rukwa mine.
It has a contract term of four years and will be automatically renewed for a further four years unless terminated by either party.
Edenville also expects the agreement to represent the first stage of a wider strategic partnership with ILTL, which will also cover other aspects, including sales, marketing, offtake and an asset level loan.
ILTL is expected to also become a customer of Edenville prior to the restart of mining operations in Tanzania, which are currently suspended as a result of the Covid-19 pandemic.
It is envisaged that ILTL will enter into a long-term coal supply agreement, which will see it provide an anchor tenancy at Rukwa, by initially buying 3 000 t a month of washed coal at standard market rates, before increasing this to 5 000 t a month over a 12-month period.
ILTL is also expected to use its logistics network and expertise with respect to existing and potential customers. The directors believe this should improve the likelihood of future customers entering into long-term contracts with the company, given they would benefit from these anticipated transport and logistics savings.
CAPITAL RAISE & CREDITOR AGREEMENTS
Given the delays in the anticipated ramp up of production, initially from a protracted rainy season and subsequently from the consequences of the Covid-19 pandemic, the company has had to address its working capital position.
It has successfully raised gross proceeds of £500 000 through the issue of new ordinary shares.
In addition, over recent weeks Edenville has been engaging with the company's creditors. Following these discussions, the company has been able to reduce its current liabilities from about £270 000 to about £145 000.
As a result, about 25% of the proceeds from the placing will be applied to settle these creditors, with the balance being used for operations and general working capital purposes.
Following the completion of the placing and the payment to creditors, Edenville will have a cash balance of about £375 000.
When coupled with the proposed loan to be provided by ILTL, Edenville is comfortable it will have sufficient funds to bring Rukwa into a position where it is cashflow positive from operations.