For a junior company, with a market capitalisation some way shy of £50 mln, it’s clearly punching above its weight on its home turf of Tanzania.
But this is what Kibo does.
Just a few days before it announced the General Electric deal, Kibo was able to say that it had secured the first tranche of funds due to it under the terms of a deal signed in August with SEPCO, a major Chinese construction and engineering group specialised in power stations.
Both the SEPCO and the GE deals relate to the development of the Mbeya power and coal project in central southern Tanzania. SEPCO’s financial role may end up being more central, with GE set up more as a supplier at this stage, but there is scope for the American giant to assist in bringing the project to what Kibo calls a “successful financial close.”
Either way, with the additional support of the Tanzanian government, it’s clear that Mbeya has significant momentum behind it.
Meanwhile, the company’s gold portfolio in the Lake Victoria Goldfields district to the north has been expanding, following the acquisition of Imwelu, a project that lies on ground directly contiguous to Kibo’s existing Imweru gold project.
The plan now is to create a new Aim-listed gold vehicle called Katoro Mining to hold the gold assets.
Significant Tanzanian mining footprint
The Tanzanian government has a pressing need to connect wide swathes of the south of the country to the grid, and is keen to see Mbeya progress. It’s thrown its full support behind the ongoing work on the project, which is now at the integrated bankable phase, following a completion of independent mining bankable feasibility and power feasibility studies earlier in 2016.
Results of the power feasibility study came in “well above expectations” according to Kibo, and it may have been the results of this report which brought GE to the table.
The study envisaged a base-case scenario under which two 150MW coal-fired units would be combined in the construction of a power station capable of producing 1,840 gigawatt hours per year.
That in turn would consume around 1.5 mln tonnes of coal per year, which is well within the parameters of the mine design.
The plan eventually would be to push power production capacity out to at least 600MW.
All this progress means that Kibo as a company looks quite different to the way it looked at the start of 2016. Back then the coal price was low, and studies on Mbeya had yet to be completed.
The gold price was low too, and the combination of Imweru with Imwelo had yet to be put to the market.
But what a difference a few months can make - Kibo has been active as a deal-maker even as the commodity markets have moved in its favour. Gold bottomed out at the end of the year, and has since risen significantly. But an even greater rise in percentage terms has come from coal.
All of which leaves Kibo looking very well positioned and its share price close to 5 year highs.
Chief executive bullish on funding
Mbeya will be a big ask in terms of funding, but chief executive Louis Coetzee is confident the money will be found.
“We’ve been having discussions at a very high level all along,” he says.
As for the specifics of the latest arrangements with SEPCO, he’s clear on that, too. It reflects, he says, “recognition of the increased value” of Mbeya by SEPCO following the feasibility studies.
“The agreement also significantly enhances Mbeya’s ability to attract serious investors on competitive terms and significantly strengthens Kibo's position in the commercial negotiations related to the project, specifically in relation to the development of the power purchase agreement for the project.”
Broker upbeat on recent progress
SP Angel has been following Kibo for some time now, and remains upbeat on recent developments. “The involvement of GE should provide a major technical resource to the continuing development of Mbeya,” the broker said.
“The combination of two existing, adjacent and contiguous gold resources in an established gold mining district of northern Tanzania to provide an adequate resource base for a 100,000 ounce per year gold mine makes sense.”