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Kibo Mining delight at Rukwa coal mine projections

Last updated: 02:03 10 Dec 2014 AEDT, First published: 03:03 10 Dec 2014 AEDT

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All four options for the mine at Kibo Mining’s (LON:KIBO) Rukwa coal and power project (RCPP) in Tanzania should make healthy returns, a new study has indicated.

The definitive feasibility study indicated annual estimated coal sale revenues of between US$39mln and US$43mln, assuming annual sales of 1.6m tonnes over 27 years.

At a cost margin in a range of 38% to 45%, Kibo suggests this would amount to annual gross profit between US$14.8mln to $19.4mln.

Using a real discount rate of 5.7%, the net present value of the coal mine portion was in a range of US$116mln to US$141mln.

Louis Coetzee, chief executive, said the report was highly significant in numerous areas but most notably in respect of the all-in cost margin.

The range of 38% to 45% was significantly above the 25% level considered "healthy" for this type of project, he said.

The all-in cost margin and net present value ranges were also based on very prudent assumptions, including a coal price well below current levels, he added.

The next step for Kibo is the receipt of the DFS for the power generation portion of the project, which is due shortly Coetzee said.

This should be “considerably more substantial in terms of operational revenues and its proportionate significance in respect of the economic potential of the RCPP”.

Upfront capital costs for the coal mine were in a range of US$46mln and US$89mln, with a payback period of between 3.9 and 4.7 years.

The four options looked at by consultant Minxcon for the DFS included: contractor mining, crusher-only; contractor mining, de-stoning plant; owner operated mining, de-stoning plant; and surface miner, de-stoning plant excluding a crusher.

Broker SP Angel added that at 250-350Mw Rukwa would be a significant addition to Tanzania’s energy output, currently thought to be around 800MW of useable capacity. 

“Although a project of this nature would be likely to attract support from development authorities, Kibo may have a financing challenge in current market conditions.”

Shares rose over 21% to 9p.

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