Rukwa Project - Joint Development Agreement Signed

RNS Number : 6679K

Kibo Mining Plc

20 April 2015

 

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: IE00B97C0C31

("Kibo" or "the Company")

 

Dated: 20 April 2015

Rukwa Coal to Power Project - Joint Development Agreement Signed

Kibo Mining Plc ("Kibo" or the "Company") (AIM:KIBO; JSE AltX: KBO), the Tanzania focused mineral exploration and development company, is pleased to announce that the Company has now signed a Joint Development Agreement ("JDA") in respect of the Rukwa Coal to Power Project ("RCPP").

Highlights

·     Joint Development Agreement signed for the Rukwa Coal to Power Project;

·     Development partner confirmed as SEPCO III of QingDao, China, one of the world's largest and technically most experienced EPC (Engineering, Procurement and Construction) organisations;

·     SEPCO III to contribute up to US$3million towards completing remaining Definitive Feasibility Study work by October 2015;

·     Upon successful completion of the  Definitive Feasibility Study, the RCPP will be transferred into a Special Purpose Vehicle in which Kibo Mining will hold a minimum equity position of 85%, protecting and retaining maximum shareholder value in the RCPP as it develops;

·     Under the agreement Kibo is also able to further release value in the SPV by part disposal of its interest. This will generate cash which can, if required, be used to fund any ongoing RCPP cost contribution, allowing the project to be operationally self-financing for Kibo;

·     Financial Close for RCPP expected by December 2015, with construction mobilisation commencing during Quarter 1 of 2016

·    Construction work expected to commence in Quarter 2 of 2016, with completion and first power delivered into the grid, expected by Quarter 1 2019. 

Louis Coetzee, Chief Executive Officer of Kibo Mining plc, commented: "Kibo Mining is delighted to confirm that we have concluded a Joint Development Agreement with Sepco III one of the world's largest, most technically capable and financially robust EPC providers. 

This agreement aligns the Kibo team with the technical capability of Sepco III, ensuring the finalisation of feasibility work and the ultimate design, construction and delivery of the RCPP will be undertaken in accordance with world class standards.  

We are also extremely pleased that Sepco III is contributing funding that is required to complete the remaining RCPP feasibility study work, which defrays costs for Kibo and demonstrates a strong belief in the commercial viability of the RCPP.

The structure of this transaction means the original cost of acquisition of the Rukwa Project and all Kibo's expenditure thereafter will be fully recognised in the Special Purpose Vehicle that will ultimately hold the RCPP asset. Kibo will get full recognition for the value that has been created in the RCPP to date, as opposed to a mere recognition of direct expenditure. As a consequence the RCPP will generate optimal returns for Kibo from any value created going forward. This is the very reason why the Company held out for so long before it signed a Joint Development Agreement, since we had to make sure that a Joint Development Agreement on the RCPP rewards shareholders appropriately for current value, but most importantly secures shareholders' position for maximum returns on the RCPP's future value.    

Kibo and its shareholders will therefore retain a significant interest in the RCPP throughout all stages of development and thereafter during power revenue generation, providing exposure to the substantial project valuation upside. The additional optionality in the JDA means that Kibo can transact over its remaining holding interest to release value in the project, including to cover feasibility costs or to provide a commercial return for the Company and shareholders.

Engaging with a highly respected EPC partner adds technical capability for project delivery, providing considerable reassurance for all stakeholders. It also initiates the Company's commercialisation of the RCPP for shareholders and marks a key point in the RCPP development for the Tanzanian government and local communities, who will benefit from the life-changing enhancement of living standards and opportunity this project will provide.

We look forward to working with Sepco III who we have found to be a highly capable, practical and proficient team."

Joint Development Agreement Overview

A JDA has been signed between Kibo Mining and SEPCO III ("the parties") wherein the parties have agreed to jointly develop the Rukwa Coal to Power Project.  Further information in respect of the RCPP is provided separately below. (NOTE: Please follow the following link for extensive background information on SEPCO III: http://www.sepco3.com/profile/columnsId=1.html )

The JDA is subject to finalisation of Due Diligence, including a site visit which is scheduled for week commencing 20^th April 2015. 

Subject to the two companies' required internal approvals as well any required governmental approvals, SEPCO III will invest in equity in respect of the RCPP to a maximum of 17% of total equity in the SPV which will ultimately hold the RCPP asset as detailed below. This investment will take the form of a contribution toward the completion of the Definitive Feasibility Study and all related activities leading in effect to the point of financial close.

Subject to reasonable conditions with regard to the selection of any additional operational or financing partners, this JDA enables the introduction of new parties to fund, amongst other items, feasibility study work. Both companies will also be able to dispose of an additional proportion of its project holding in the SPV in order to raise capital.

SEPCO III will retain specfic responsibility to lead the Power Generation component of the Definitive Feasibility Study and Kibo Mining will lead the Mining component. It is expected that the Definitive Feasibility Study across both Mining and Power Generation compents will be completed by October 2015.

During completion of the Definitive Feasibility Study the partners will collaborate with regard to identification and review of construction providers and power plant operators to identify suitable organisations to build and operate the completed RCPP. The partners will also collaborate to identify, review and confirm the appropriate financing structure for the RCPP construction process and relevant financing partners. In addition, the Definitive Feasibility work will also include negotiation and agreement of a Power Purchase Agreement, Implementation Agreement and Environmental Impact Assessment.

After successful completion of Definitive Feasibility Studies, and assuming the project is deemed feasible, a Special Purpose Vehicle will be established into which the RCPP will be transferred.  Kibo Mining will hold at least 85% of this SPV and SEPCO III up to 15% of total equity.

SEPCO III will be the sole EPC contractor for the RCPP, subject to the submission by SEPCO III of an EPC proposal at financial close, which, when independently evaluated, complies with the following:

·    The EPC proposal must be price competitive against international benchmarks for similar EPC contracts; and

·    The EPC proposal must demonstrate international industry best practice standards.

It is anticipated that financing for the RCPP will be available at a 70% debt to 30% equity gearing ratio. The specific providers of both debt and equity capital will be identified during the course of 2015 but only confirmed during financial close in December 2015. Standard Bank, financial advisors for the RCPP, will play an integral role in the financing discussions and process.

RCPP Background

Through the RCPPKibo Mining is seeking to mine a 109Mt NI 43-101 compliant thermal coal resource, utilising this coal for a mine mouth 250MW to 300MW thermal power station.  This project is in the development stage, with Definitive Feasibility work ongoing. Various reports have been released on this project in the last quarter of 2014, as detailed below. The project has the support of the Tanzanian government at all levels as well as the local community, and is a key component of the Tanzanian National Strategic Energy Plan which is looking to resolve the shortage of power in the country, notably in the region where the project is located.

RCPP Technical Findings to Date

During Q4 2014 and following the extensive review and analysis of the RCPP by third party advisors, Competent Persons' Reports were prepared in respect of both Mining and Power Generation components of the RCPP.  These technical findings are summarised below:

Mining Component

Completion of Concept Study Report (Stage 1, Phase 1 of the Definitive Mining Feasibility Study) for the Rukwa Mineral Resource by Minxcon Projects (Pty) Ltd. Report findings were announced on 9 December 2014, with highlights including:

·    Four alternative options identified for project development with the project financially feasible for all four alternative options evaluated;

·    Capital Investment of between US$46 million and US$89 million;

·    Annual coal sale revenues estimated between US$37 million and US$44 million depending on the selected option;

·    All-in in Cost Margin estimates of 38% to 45% (equates to an indicative annual margin of US$14.8 million to US$19.4 million);

·    NPV of US$116 million to US$141 million at 5.7% discount rate with payback period 3.9 to 4.7 years

Thermal Power Station Component

Completion of Power Pre-Feasibility Report by Aurecon. Report findings were announced on 18 December 2014, with highlights including:

·   Four thermal plant configurations were assessed with recommendation for 2 X 150 megawatt Circulating Fluidised Bed option to be evaluated at Feasibility Study stage;

·   Total capital cost estimated at between US$640 million to US$760 million depending on plant configuration;

·   Indicative annual power generated (dependent on plant option selected) between 1,841 gigawatt hours per annum and 1,877 gigawatt hours per annum;

·   High level environmental risk analyses identified no major obstacles to development;

·   Additional Rukwa Mineral Resource sufficiently large enough to potentially double the current design size to 600 megawatts or to be used in alternate energy conversion technologies.

Completion of preliminary base case financial model for RCPP by the Company as announced on 18 December 2014 with highlights including:

·   Estimated indicative Life of Plant revenues of approximately US$7.8 billion to US$8.4 billion;

·   Indicative project NPV of between US$230 million and US280 million (at a 15% discount rate);

·   Indicative pre-tax equity IRR > 23%; and

·   Indicative post-tax payback of 8 to 9 years

Contacts

Louis Coetzee	[phone]	Kibo Mining plc	Chief Executive Officer
Andreas Lianos	[phone]	River Group	Corporate Adviser and Designated Adviser on JSE
Elliot Hance	[phone]	Beaufort Securities Limited	Broker
Oliver Morse	[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 JORC 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 and a Power Pre-Feasibility Study for Rukwa.

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 the 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.

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.

Finally the Company also holds the Morogoro (gold) 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

20 April 2015

Corporate and Designated Adviser

River Group

 

END

 

 

AGREBLBLEZFZBBX