Power Pre-Feasibility Study Report

RNS Number : 1621A

Kibo Mining Plc

18 December 2014

 

Kibo Mining Plc (Incorporated in Ireland)

(Registration Number: 451931)

(External registration number: 2011/007371/10)

Share code on the JSE Limited:KBO Share code on the AIM:KIBO

ISIN: IE00B61XQX41

("Kibo" or "the Company")

 

Dated: 18 December 2014

Power Pre-Feasibility Study Report - Rukwa Coal to Power Project

Kibo Mining plc ("Kibo" or the "Company") (AIM: KIBO; AltX: KBO), the Tanzania focussed mineral exploration and development company is pleased to announce the findings from the Power Pre-Feasibility Study ("PPFS) report for the Rukwa Coal to Power Project ("RCPP").

Key Highlights

The PPFS report was prepared by Aurecon on behalf of the Company and findings include the following:

-    four plant configurations were assessed, with a base case technology comprising 2 x 150MW Circulating Fluidised Bed (CFB) recommended for further development in Feasibility;

-    sufficient additional coal resources are available from Rukwa to potentially expand the power station to double the current design size or to be used in alternate energy conversion technologies such as coal to liquids;

-    a technical and environmental risk assessment was undertaken which unanimously recommended further development of the project via feasibility analysis;

-    total project cost, dependent on the plant option selected, is estimated between US$640 million and US$760 million;

-    modelling was undertaken based on conservative "base-load" assumptions (80% capacity factor) to predict annual generation profiles over the plant life. Indicative annual power generated, dependent on plant option selected, will be between 1,841GWh per annum and 1,877GWh per annum.

Based on the parameters discussed above, the Company has decided to proceed with the definitive feasibility stage of the Power Definitive Feasibility Study ("PDFS") as recommended by Aurecon. Drawing relevant data from the PPFS and the Definitive Mining Feasibility Study: Phase 1, Stage 1 Report, the Company also prepared an internal preliminary financial model as a base case financial model, to be verified in respect of the 300MW power plant and coal mine base case, during the ensuing definitive feasibility studies. Publication of detailed financial information on the RCPP is at present commercially sensitive, based on early stage assumptions with regard to power generation volumes, pricing, capital and operating costs and therefore not ready for public dissemination. Highlights of the indicative base case financial model which Kibo has used to inform its decision on whether to proceed with the definitive feasibility stage of the PDFS include:

-     Indicative power generation revenues, over an assumed 25 year plant operation, of approximately US$7.8 to US$8.4billion;

-     Indicative pre-tax equity IRR in excess of 23%;

-     Indicative post-tax payback of approximately 8 to 9 years;

-     Indicative project NPV range at a 15% discount rate of US$230 to US$280 million.

The preliminary financial model and information discussed above, comprises the Company's internal financial base case for the RCPP. This base case will now be provided to the Company's independent financial and technical advisors on the RCPP, for proper assessment, evaluation, validation and adjustment during the definitive feasibility study stage of the PDFS. The commercial and financial figures discussed above should therefore not in any way be construed as a financial forecast of any kind.

Louis Coetzee, CEO of Kibo Mining plc said "This Power Pre-Feasibility Study work represents an acutely critical part of the RCPP.  We are delighted that the report received demonstrates the robust nature of the project from a technical perspective.  The purpose of the PPFS is, in part, to identify any major technical flaws that could be project fatal.  This report has confirmed no such flaws were identified.

We are particularly pleased with project robustness, because the RCPP is a clear opportunity for Kibo to assist the Tanzanian government in its striving for energy solutions to address the energy supply deficit in Tanzania.  Access to power provides enhancement to everyday life domestically and commercially.  This project above all can deliver safe and reliable base-load power to the Tanzanian people and commercial enterprises benefitting the national socio-economic development plan. The RCPP is a strategic catalyst for the economic development regionally as well as nationally and hence our resolute drive to successfully complete this coal/power project.

Notwithstanding societal benefit, any commercial development of this magnitude must have robust financials and project economics.  This has rightly been made all the more challenging by our desire to offer cost effective power for users. The data currently available from the Definitive Mining Feasibility Study report, a summary of which was released to market on 11^th December 2014, is now supplemented by the data we have gathered from the Power Pre-Feasibility Study and associated internal financial modelling. Indicative project revenues, capital payback, deliverable margin estimates, free cash flow forecasts, project NPVs and IRR estimates appear to be attractive for both the Company as well as its potential clients.  In our opinion this is best illustrated by our base case IRR data which highlights a pre-tax equity IRR in excess of 23%, which is substantially above levels of return which have attracted investment in the past and the average IRR for similar projects in the same geographic area where the RCPP will be located. 

The technical quality and financial robustness of the project were expected to be very strong, but the reports received have still exceeded expectations.  As a result, the intensity and nature of partner discussions have intensified with a considerable degree of justifiable competitive tension as a consequence".

Important Notes for Readers

We would refer readers to our Definitive Mining Feasibility Study announcement of 11^th December 2014 and the Executive Summary Report published on our website covering the Phase 1, Stage 1 Report dealing with the mining component of the RCPP.

We would ask readers to note that the Company is engaged in highly confidential discussions with various parties, including regulatory authorities, for whom the release of detailed financial information may cause a breach of confidentiality and normal commercial sensitivity and may therefore harm the Company's ability to complete negotiations on the best terms for shareholders.

The specific financial information provided is an extract from an early stage economic assessment of the RCPP made for the purposes of deciding whether to extend the study work undertaken on the RCPP to date. The economic assessment is based on input assumptions which will require extensive testing and are likely to be subject to significant change as the feasibility study process progresses.

Contacts

Louis Coetzee	[phone]	Kibo Mining plc	Chief Executive Officer
Andreas Lianos	[phone]	River Group	Corporate Adviser and Designated Adviser on JSE
Jon Belliss Abigail Wayne	[phone]	Hume Capital Securities Plc	Broker
Oliver Morse and Trinity McIntyre	[phone]	RFC Ambrian Limited	Nominated Adviser on AIM
Daniel Thöle Lucinda Alderson	[phone]	Bell Pottinger	Investor and Media Relations

Kibo Mining - Notes to editors

Kibo Mining is listed on the AIM market in London and the AltX in Johannesburg. The Company is focused on exploration and development of mineral projects in Tanzania, and controls one of Tanzania's largest mineral right portfolios. Tanzania provides a secure and stable operating environment for the mineral resource industry and Kibo Mining therein.

Kibo Mining holds a thermal coal deposit at Rukwa, which has a significant NI43-101 compliant defined resource (See Table 1 below), and is developing a 250-350MW mouth-of-mine thermal power station with an established management team that includes Standard Bank as Financial Advisor.  Kibo is undertaking a Coal Mining Definitive Feasibility Study with Stage 1 Phase 1 positive results now released and a Power Pre-Feasibility Study for Rukwa with initial positive findings already released.  The Company is now engaged with a number of major Independent Power Producers and other organisations and seeking to secure a commercial partnership or partnerships, to finalise feasibility work across the project and move toward the construction phase.

The Company also has extensive gold focused interests including Lake Victoria Goldfields and Morogoro projects. At Lake Victoria, the Company has projects with a 550,000oz JORC compliant gold Mineral Resource at Imweru Project (See Table 2 below) and a 168,000oz NI 43-101 compliant gold Mineral Resource at Lubando Project (See Table 3 below) in which the Company holds a 90% attributable interest. The Company is currently undertaking a Definitive Feasibility Study on its Imweru Project, with Preliminary Economic Assessment study findings to be released in the near term. As part of the Kibo Gold Portfolio, Kibo also holds the Morogoro Gold project where the company is seeking a Joint Venture partner to continue active exploration activities at this highly prospective opportunity.

Kibo also holds the Haneti Project on which the latest technical report confirms prospectivity for nickel, PGMs, gold and strategic metals including Lithium.

Kibo Mining further holds the Pinewood (coal & uranium) project where the company has signed a MOU to enter into a 50/50 Exploration Joint Venture with Metal Tiger PLC.

The Company's projects are located in the established and gold prolific Lake Victoria Goldfields, the emerging goldfields of eastern Tanzania and the Mtwara Corridor in southern Tanzania where the Government has prioritised infrastructural development attracting significant recent investment in coal and uranium. The Company has a positive working relationship with the Tanzanian government at local, regional and national levels and works hard to maintain positive relationships with all communities where company interests are held.  The Company recognises the potential to enhance the quality of life and opportunity for Tanzanian citizens through careful development of its projects.

Updates on the Company's activities are regularly posted on its website www.kibomining.com   

Technical data

Rukwa Mineral Resource

Table 1 below presents a table showing the Mineral Resource estimate for the Rukwa Coal Project. The table is taken from an NI 43 101-Compliant Report by GEMECS (Pty) Ltd dated April 2012.

Table 1

RUKWA COAL RESOURCE SUMMARY- GEMECS (Pty) Ltd
	SEAM	NI 43-101	IN SITU
SEAM	THICKNESS	CLASS	MILLION TONS
S4	1.14	Indicated	2.17
S3U	2.04	Indicated	6.92
S3L	2.3	Indicated	12.63
S2	3.45	Indicated	23.43
S1U	2.48	Indicated	7.34
S1L	2.92	Indicated	17.4
S0	1.08	Indicated	1.44
Total Indicated Resources			71.34
S4	1.31	Inferred	1.38
S3U	2.24	Inferred	2.94
S3L	2.27	Inferred	3.86
S2	3.42	Inferred	7.94
S1U	2.05	Inferred	6.5
S1L	3.15	Inferred	12.83
S0	1.06	Inferred	2.6
Total Inferred Resources			38.05
TOTAL RESOURCES			*109.39

*Kibo holds 100% of the Rukwa Mineral Resource

Imweru Mineral Resource

Table 2 below presents a table showing the Mineral Resource estimate for the Imweru Project  at  a base case economic cut-off grade for the reporting of the resource  of  0.4 g/t. The table is taken from a JORC-Compliant Report by Tetra Tech EBA dated February 2014.

Table 2

Area	Material Type	Classification	Cut- off (g/t)	Specific Gravity	Metric Tonnes (t)	Short Tons	Gold Grade (g/t)	Contained Gold Ounces (troy)
Central	Laterite	Indicated	0.40	2.50	131,000	144,000	1.785	8,000
	Saprolite	Indicated	0.40	2.50	706,000	778,000	1.387	32,000
	Bedrock	Indicated	0.40	2.89	1,895,000	2,089,000	1.043	64,000
	Total	Indicated	0.40	2.77	2,732,000	3,012,000	1.168	103,000
Central
	Laterite	Inferred	0.40	2.50	685,000	755,000	1.317	29,000
	Saprolite	Inferred	0.40	2.50	1,047,000	1,154,000	1.040	35,000
	Bedrock	Inferred	0.40	2.89	7,838,000	8,640,000	1.029	259,000
	Total	Inferred	0.40	2.82	9,569,000	10,548,000	1.051	323,000
East	Total	Inferred	0.40	2.70	2,653,000	2,925,000	1.449	124,000
Imweru Property Total		Indicated	0.4	2.77	2,732,000	3,012,000	1.168	103,000
		Inferred	0.4	2.79	12,222,000	13,473,000	1.137	447,000
		Combined (inf+ind)	0.4	2.79	14,954,000	16,485,000	1.143	550,000

*Kibo holds 90% of the Imweru Mineral Resource

*   Total estimates are rounded, based on composites capped at 26 g/t gold at Imweru Centraland 25 g/t at Imweru East, the cut-off grade isbased on a gold price of US$1,200 and a 90%  metallurgical recovery is assumed in calculation of cut-offgrade. A base case of  0.40  g/t has been selected.
 

** Classification of MineralResources incorporates the terms and definitions from the Australian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code) published bythe Joint Ore Reserve Committee (JORC)

Lubando Mineral Resource
 

Table 3 below presents a table showing the Mineral Resource estimate for the Lubando Project at a base case economic cut-off grade for the reporting of the resource of 0.5 g/t Au. The table is taken from an NI 43 101-Compliant Report by EBA Engineering Consultants Limited (now part Tetra Tech EBA) dated August 2009.

TABLE3: LUBANDO MINERALRESOURCE SUMMARY - BASECASE*
Category	West Zone	East Zone South	East Zone Mid	East Zone North	Total
Measured Resource
Measured Resource(t)	107,900	4,880	16,900	54,440	184,150
Grade(g/t)	1.69	2.52	1.72	2.48	1.95
Total Gold(oz)	5,900	400	950	4,340	11,500
Indicated Resource
Indicated Resource(t)	280,710	18,330	61,000	149,350	509,420
Grade(g/t)	1.61	2.23	1.89	2.73	1.99
Total Gold(oz)	14,500	1,300	3,700	13,120	32,600
Inferred Resource
Total Resource(t)	1,090,000	65,470	209,340	535,330	1,900,140
Grade(g/t)	1.27	1.56	3.34	3.13	2.03
Total Gold(oz)	44,550	3,300	22,500	53,900	124,200

*Kibo holds 90% of the Lubando Mineral Resource

* Numbers are rounded. Composites capped at 10.85g/t gold. Cut-off grade of 0.5 g/t gold based on a gold price of US$850/oz and assumed 100% metallurgical recovery.CIM definitions were followed for Mineral Resources.

Pursuant to the terms of an inherited agreement with Barrick East Africa Exploration LTD (BEAL), Kibo currently has an effective 90% interest in the Imweru and Lubando Project (and thus a 90% attributable interest in the Imweru and Lubando Mineral Resources shown in Table 2 and 3 above), with Barrick having a 10% carried interest up to a decision to mine at which point they have to contribute or be diluted to a 2% net smelter royalty. BEAL also has a first right of refusal pursuant to which they can buy the 90% interest in the project at an agreed market related value after completion of a Bankable Feasibility Study.  Kibo remains the operator of the project.

Review by Qualified Persons

The information in this announcement that relates to the Rukwa Coal Mineral Resource is taken from a report titled "Independent Technical Report for the Rukwa Coal Project, Mbeya Region, United Republic of Tanzania" dated 19^th April 2012 by CD van Niekerk Director and Principal Geologist with the firm GEMECS (Pty) Ltd. Mr van Niekerk is a Professional Natural Scientist with the South African Council for Natural Scientific Professions (SACNASP), Registration No. 400066/98 and a Fellow Member of the Geological Society of South Africa. He has relevant experience and technical qualifications to be a "Qualified Person" for reporting coal resources to the NI 43-101 Standard

Information in this announcement that relates to the Imweru Mineral Resource is taken from the report titled "Resource Update for the Imweru Property Geita Region Northern, Tanzania, JORC Competent Persons Report" dated February 17^th 2014 (the "Report"). The Report states a JORC-compliant Mineral Resource estimate and was prepared for Kibo Mining plc by James Barr P.Geo. and Darryn Hitchcock P.Geo. Senior Geologist and Geologist respectively with TetraTech EBA Ltd. Both Mr. Barr and Mr. Hitchcock are registered as Certified Professional Geologists with Association of Professional Engineers and Geoscientists of British Columbia a recognised professional organisation. Mr Barr as principal author responsible for the Report has experience in the evaluation and reporting of Archaean Gold projects and is a "Qualified Person" for reporting gold resources to the JORC Standard. He consents to the inclusion in this document of the matters based on his information in the form and context in which they appears. 

The information in this announcement that relates to the Lubando Mineral Resources is taken from a report titled  "Technical Report on the Lubando property, Mwanza, Tanzania" dated 31^st  August 2009" (the "Report") The  Report is NI 43-101 compliant and was prepared for Great Basin Gold Rusaf Gold Limited by Nathan Eric Fier C.P.G., P.Eng. Market Director for EBA Engineering Consultants Ltd and a Senior Mining Consultant. Mr. Fieris registered as a Certified Professional Geologist with the American Institute of Professional Geologists, Registration No 10062, and a professional Engineer in British Columbia, Canada Registration No. 135165. He has extensive experience in the evaluation and reporting of Archaean Gold projects.

The Company's Exploration Director, Noel O'Keeffe has reviewed the resource reports and the references to them in this announcement.

Johannesburg

18 December 2014

Corporate and Designated Adviser

River Group

 

 

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