Kibo Energy PLC

Business and Financial Review • Oct 12, 2015

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RNS Number : 9100B

Kibo Mining Plc

12 October 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:  IE00B97C031

("Kibo" or "the Company")

12 October 2015

Mbeya Definitive Mining Feasibility Study - Optimized Project Financials

Kibo Mining plc ("Kibo" or the "Company") (AIM: KIBO; AltX: KBO), the Tanzania focussed mineral exploration and development company, is pleased to announce significantly improved financials for the Mbeya Coal to Power Project's ("MCPP") coal mine component. 

Key highlights

The Company and its advisers Minxcon Projects have now completed a financial optimization study for the MCPP coal mine, based on feasibility results received to date.

The impact of optimal gearing for the MCPP coal mine was tested on the surface miner contractor option with the following key results:

-     All-in cost margin ranges from 47.9% to 48.1%. Applying the aforementioned all-in cost margin, Kibo interprets that annual earnings before interest and tax ("EBIT") of between US$ 23.5 million to US$ 23.6 million will be generated;

-     Applying a real discount rate of 5.51%, the best estimated Net Present Value ("NPV") of free cash flow to equity ranges between US$ 214 million and US$ 219 million;

-     Equity IRR (leveraged) range between 131% and 146%, with a Project IRR of 54%;

-     Cash return on capital invested ranging between 726% and 732%; and

-     Project Payback Period before loan of 2.6 years

Louis Coetzee, CEO of Kibo Mining, said: "We are delighted to provide this update showing the outcome of the latest, more detailed work undertaken by our advisers for the MCPP.

In particular, we are delighted with the confirmation of the NPV range of US$214m to US$219m which is solely in respect of the coal mining component and does not include the significantly larger power generation portion of the project. 

This is a large-scale project which is now demonstrably lower risk. With the relatively low capital investment required, the Mbeya coal mine delivers a high project IRR and short payback period.

The IRR being substantially above the cost of debt makes it an attractive option to consider project level loan financing. The project's robust financials will play in Kibo's favour in respect of the competitiveness and conditions attached to any such loans.

As each stage of our work on the MCPP is completed, Kibo emerges with a stronger, more valuable project. We will update shareholders with further progress in the near-term in what is a busy operational period for the Kibo team and the MCPP."

Important Notes for Readers:

The information contained within this report is taken from the Definitive Mining Feasibility Study ("DMFS") Phase 2, Stage 1 report (Pre-Feasibility Report) and subsequent studies, produced by Minxcon Projects in respect of the MCPP. The information provided relates solely to the coal mining operation reflecting the physical extraction of coal from the project area and delivery of coal to the proposed power plant. The latest power generation financial and operational information will be supplied separately, in due course. 

Recognising the level of commercial sensitivity and for the protection of all stakeholders' interests we have limited the technical information that we publish in this report and in the wider public domain at this time. 

Readers must note that operational and financial data pertaining to any complex development project of this nature is project specific. Kibo has undertaken the MCPP DMFS to properly and professionally understand the technical and financial merits of the project. The findings outlined can only be used in an assessment and analysis of the MCPP to which this work relates and not as a generic benchmark standard.

DMFS Financial Optimization

Four alternative options of the selected mining method were identified for project development and the financial data ranges that follow, are applicable to one of these options: the surface miner contractor option that was identified as the preferred mining option during the Pre-Feasibility Study ("PFS"). (See RNS dd. 12 August 2015).

The financial optimization study for the surface miner contractor option was developed on the following premises:

-     Lending Rate:                           LIBOR+5%

-     Loan Period:                           10 and 15 years (Note: it is anticipated that the MCPP will be financed as an integrated project).

-     Peak Funding Requirement:      US$ 37.905 million

-     Debt / Equity Ratio:                  70:30

-     Loan Amount:                          US$ 26.534 million

-     Mine Life:                                28 Years

-     Annual Coal Production:          1.48 million tonnes

Payment calculations were adjusted in real terms. The positive impact of interest on the tax calculation was taken into account in the model. The inflow of the loan amount and outflow of the principal payments was included in the after tax cash flow.

Based on the above assumptions the model produced the following results:

-     Annual estimated coal sale revenues of US$ 48.4 million;

-     All-in cost margin ranges from 47.9% to 48.1%;

-     NPV range between US$ 214 million and US$ 219 million, applying a real discount rate of 5.51% with payback period (before loan) of 2.6 years

-     Equity IRR (leveraged) range between 131% and 146% which includes debt benefit and Project IRR of 54%;

-     Cash return on capital invested ranging between 726% and 732%;

-     An annual EBIT of between US$ 23.5 million to US$ 23.6 million will be generated; and

-     Total capital investment in year 1 consisting of US$ 11.37 million equity and US$ 26.53 million loan.

The high all-in cost margin reflects low operating costs as a result of the proposed mining method and shallow ore body, small sustaining capital expenditure and fixed coal price as received from the power plant and is a key indicator of the robustness of the Project.

Contacts

Louis Coetzee	+27 (0) 83 2606126	Kibo Mining plc	Chief Executive Officer
Andreas Lianos	+27 (0) 83 4408365	River Group	Corporate Adviser and Designated Adviser on JSE
Jon Belliss	+44 (0) 207 382 8300	Beaufort Securities Limited	Broker
Oliver Morse	+61 8 9480 2500	RFC Ambrian Limited	Nominated Adviser on AIM
Daniel Thöle / Anna Legge	+44 (0) 203 772 2500	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, the Mbeya Coal to Power Project ("MCPP"), previously called Rukwa Coal to Power Project ("RCPP"), 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 the Mbeya project with an integrated Coal-Power interim study report to be released in the near term. On 20th April 2015, Kibo signed a Joint Development Agreement for the completion of the Definitive Feasibility Studies and development of the MCPP with China based EPC contractor SEPCO III.

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 entered into a 50/50 Exploration Joint Venture with Metal Tiger plc.

Finally the Company also holds the Morogoro (gold) project where the company has also entered 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 Central and 25 g/t at Imweru East, the cut-off grade is based on a gold price of US$1,200 and a 90%  metallurgical recovery is assumed in calculation of cut-off grade. A base case of  0.40  g/t has been selected.

** Classification of Mineral Resources incorporates the terms and definitions from the Australian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code) published by the 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 19th 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 17th 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 31st  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

12 October 2015

Corporate and Designated Adviser

River Group

This information is provided by RNS

The company news service from the London Stock Exchange

END

DRLFFASIEFISEDS