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Tlou Energy Ltd - Operational Report Quarter Ended 30 September 2020

RNS Number : 5463D
Tlou Energy Ltd
29 October 2020
 

 

29 October 2020

 

Tlou Energy Limited

("Tlou" or "the Company")

 

OPERATIONAL REPORT - QUARTER ENDING 30 SEPTEMBER 2020

 

 

Tlou Energy Limited is an ASX, AIM and BSE listed company focused on delivering power in Botswana and southern Africa through the exploration and development of gas and solar. The Lesedi Power Project ("Lesedi") is the Company's most advanced project with plans to develop gas and solar power generation assets and the sale of electricity into the regional power grid.

 

Transmission Line

Detailed design and engineering of the 66kV overhead line and 66kV line feeder bay extension at the Serowe substation continued during the quarter. The Lesedi generation site is located approximately 100 Km from the town of Serowe where connection to the power grid is proposed. This Transmission line is a key item to unlock the value of Tlou's assets. Once connected to the grid and generation assets are in place, Tlou can produce power from gas and solar (subject to any outstanding approvals) to deliver first revenue from electricity sales. The Environmental and Social Impact Assessment for the transmission line has been completed, as well as route alignment and associated surveys. 

 

The Company plans to construct the ~100 Km transmission line as soon as possible. Work on the engineering and design of the line has been done in consultation with Mott MacDonald engineering consultants in Gaborone. This work includes preparation of pre-qualification documents with the objective of short-listing bidders to be invited to tender for construction of the transmission line and associated infrastructure.

 

The Company has received numerous pre-qualification applications which are now being assessed. Once a shortlist of successful applicants is in place, these groups will be issued with tender documents and requested to submit their final proposals. This is expected to be completed later this year.

 

Project Finance

Project finance discussions continued during the quarter. The Company is currently seeking funding for development of the Lesedi power project. The project is proposed to be developed in two phases.

 

Phase one involves transmission line construction, transformers, grid connection, electricity generators and potentially the drilling of additional gas wells. Initial generation is proposed to be up to 2MW of electricity. Funding required for phase one is ~USD $10m.

 

Phase two funding is for the expansion of electricity generation up to 10MW. This will involve drilling additional gas wells and the purchase of additional electricity generators. Funding required for phase two is ~USD $20m.

 

The Company is evaluating both debt and equity funding options or a mix of both. Indicative proposals have been received and as the Company currently has sufficient funds in the bank for its general working capital and consequently is not under any financial pressure to conclude a funding package for the Lesedi power project, the Company will carefully weigh up all options before making a decision on the most appropriate financing option.

 

Capital Raised

During the quarter the Company successfully completed an entitlement offer and placement raising A$3.0 million (~£1.65 million, ~BWP 24 million). The entitlement offer and placement comprised the issue of 75,018,854 new ordinary shares at a price of A$0.04 (£0.022, BWP0.32). At the end of the quarter the Company had cash of approximately A$3.575m.

 

The Company's share capital is comprised of 525,199,039 Ordinary Shares.  There are no shares held in Treasury. Therefore, the total number of Ordinary Shares with voting rights is 525,199,039. This figure may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the Company.

 

Project Areas

The Company has three project areas in Botswana:

·    Lesedi Project - Gas & Solar Development, Exploration & Evaluation

·    Mamba Project - Exploration & Evaluation

·    Boomslang Project - Exploration & Evaluation

 

Lesedi Project Area, Botswana

Licences:              Mining Licence 2017/18L, Prospecting Licences 001 & 003/2004 and 35 & 37/2000

Ownership:        Tlou Energy Limited 100%

 

The Lesedi project covers an area of approximately 3,800 Km2 and consists of four Coal and Coal Bed Methane (CBM) Prospecting Licences (PL) and a Mining Licence.  The Mining Licence area is currently the focal point for the Company's operations and includes the Lesedi production wells or 'pods'. 

 

The Lesedi project is the Company's most advanced project. Plans are in place to install solar photovoltaic (PV) panels and gas-fired electricity generators and connect to the power grid in Botswana. The project has full environmental approval which includes gas extraction, electricity generation and construction of transmission lines.  In addition, the Company has approval for 20MW of solar generation. CBM power is ideal for use in conjunction with solar projects. A generation license has also been granted by the Botswana Energy Regulatory Authority (BERA). This licence has a 15-year term and is valid for both solar and gas-fired generation.

 

Tlou's mining licence is required by an operator to develop a CBM asset.  This licence spans a large 900 Km2 area and is valid until 2042. 

 

Tlou has the only independently certified CBM gas reserves in Botswana, with 252 Billion Cubic Feet (BCF) of 3P gas Reserves certified in the Lesedi project area.  In addition, the 3C Contingent Gas Resources are approximately 3 Trillion Cubic Feet (TCF). 

 

Initial development of the Lesedi project is planned to be up to 10MW of power. This is designed to be a hybrid of solar power and gas-fired power. Gas-fired power can provide back-up power when solar is not available. The location of the Central Processing Facility (generation site) at the Lesedi project is approximately 100 Km from the electricity grid. The Company is planning to construct a 100 Km transmission line and is in the process of securing funding to do so.

 

The proposed off-taker (purchaser) of the power generated by Tlou is the national energy utility, Botswana Power Corporation (BPC). The Company has agreed a Power Purchase Agreement (PPA) with BPC for the first 2MW of power. A submission has also been made to secure a PPA for up to 10MW.

 

The status of the Lesedi area licences is as follows:

Licence

Expiry

Status

Mining Licence 2017/18L

August 2042

Current

PL 001/2004

March 2021

Current

PL 003/2004

March 2021

Current

PL 035/2000

September 2022

Current

PL 037/2000

September 2022

Current

 

Mamba Project Area, Botswana

Licences:              Prospecting Licences 237-241/2014

Ownership:        Tlou Energy Limited 100%

 

The Mamba project consists of five Coal and CBM PL's covering an area of approximately 4,500 Km2.  The Mamba area is situated adjacent to Tlou's Lesedi project and is on-trend with the asset that has produced the encouraging results observed to date.  In the event of a gas field development by Tlou, the Mamba area provides the Company with flexibility and optionality. 

 

Independently certified 3P Gas Reserves of 175 BCF are already in place at the Mamba project.  The Mamba project is in the exploration and evaluation phase with further operations required on these licences. The next stage of development is likely to be core-hole drilling and a seismic survey of the area. Positive results from these operations could expand the reserves footprint across the Mamba project area.

 

The Mamba area has the potential to become a separate revenue generating development project in addition to the proposed development at Lesedi, with solar and gas-fired generation a possibility subject to approvals.  Geographically, the Mamba project area is approximately 50 Km closer to the Orapa Power station than the Lesedi project area. The potential exists that a gas pipeline could be constructed to supply gas from the Mamba project to the 90MW Orapa Power station.

 

The status of the Mamba area licences is as follows:

Licence

Expiry

Status

PL 237/2014

September 2021

Current

PL 238/2014

September 2021

Current

PL 239/2014

September 2021

Current

PL 240/2014

September 2021

Current

PL 241/2014

September 2021

Current

 

Boomslang Project Area, Botswana

Licence:                Prospecting Licence 011/2019

Ownership:        Tlou Energy Limited 100%

 

The Company's most recently acquired Prospecting Licence, PL011/2019 designated "Boomslang", is valid for an initial term of 3 years.  The licence area is approximately 1,000 Km2 and is situated adjacent to the Company's existing licences.  The Boomslang area is also located on-trend with the asset that has produced the encouraging results observed to date at the Lesedi project. 

 

The Boomslang licence area provides the Company further flexibility and optionality for development of different projects.

 

There have been no ground operations completed in the Boomslang area as the Company is awaiting confirmation of environmental approval to commence exploration activities.  This approval was expected earlier this year but has been delayed.  Once approved and subject to available funds initial exploration work is planned for this area. Similar to the Lesedi and Mamba areas and subject to results, the Boomslang project could produce solar and gas-fired power.

 

The status of the Boomslang area licence is as follows:

Licence

Expiry

Status

PL 011/2019

March 2022

Current

 

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

 

By Authority of the Board of Directors

Mr. Anthony Gilby

Managing Director

 

For further information regarding this announcement please contact:

Tlou Energy Limited

+61 7 3012 9793

Tony Gilby, Managing Director


Solomon Rowland, General Manager




Grant Thornton (Nominated Adviser)

+44 (0)20 7383 5100

Colin Aaronson, Harrison Clarke, Samantha Harrison, Seamus Fricker




Shore Capital (Broker)

+44 (0) 207 408 4090

Jerry Keen, Toby Gibbs, John More


 

Company Information

Tlou Energy is focused on delivering power solutions to Botswana and southern Africa to alleviate some of the chronic power shortage in the region.  Tlou is currently developing projects using gas and plans to combine this with solar power to provide a cleaner base load power source. 

 

Botswana has a significant energy shortage and generally relies on imported power and diesel generation to fulfil its power requirements.  Tlou's Lesedi power project provides investors with access to a compelling opportunity to displace expensive, carbon intensive diesel and imported coal-fired electricity with a more environmentally friendly alternative.

 

In addition to plans for cleaner energy, the Company is also committed to developing community projects in Botswana adding real value to peoples' lives in a region with sparse services and where few opportunities exist for the local population.  The Company aims to assist communities to become self-sustaining, develop business opportunities, improve access to education and create opportunities for self-employment and wealth creation.

 

The Company is listed on the Australian Securities Exchange, London's AIM market and the Botswana Stock Exchange and is led by an experienced Board, management and advisory team.

 

The project is significantly de-risked.  The Company is producing gas, has a Mining (or development) Licence valid to 2042 and 10 Prospecting (or exploration) Licences.  The Company also has environmental approval for both 20MW of solar power and 20MW of gas-fired power generation. The Company's project acreage covers an area spanning approximately 9,300 Km2.

 

Tlou's Lesedi and Mamba projects already benefit from significant independently certified 2P gas Reserves of ~41 Billion Cubic Feet (BCF).  In addition, 3P gas Reserves of ~427 BCF and Contingent Gas Resources of ~3,043 BCF provide significant additional potential.

 

The Company is planning an initial scalable power project.  Following successful implementation of this first scalable project, the Company looks forward to evaluating longer-term prospects for the delivery of additional electricity to Botswana and to neighbouring countries.

 

Forward-Looking Statements

This announcement may contain certain forward-looking statements.  Actual results may differ materially from those projected or implied in any forward-looking statements.  Such forward-looking information involves risks and uncertainties that could significantly affect expected results.  No representation is made that any of those statements or forecasts will come to pass or that any forecast results will be achieved.  You are cautioned not to place any reliance on such statements or forecasts.  Those forward-looking and other statements speak only as at the date of this announcement.  Tlou Energy Limited undertakes no obligation to update any forward-looking statements.

 

Appendix 5B

Mining exploration entity or oil and gas exploration entity
quarterly cash flow report

Name of entity

Tlou Energy Limited

ABN

 

Quarter ended ("current quarter")

79 136 739 967


30 September 2020

 

Consolidated statement of cash flows

Current quarter
$A'000

Year to date (3 months)
$A'000

1.

Cash flows from operating activities



1.1

Receipts from customers

1.2

Payments for




(a)   exploration & evaluation (if expensed)


(b)   development

(46)

(46)


(c)   production




(d)   staff costs

(182)

(182)


(e)   administration and corporate costs

(270)

(270)

1.3

Dividends received (see note 3)



1.4

Interest received



1.5

Interest and other costs of finance paid



1.6

Income taxes paid



1.7

Government grants and tax incentives



1.8

Other

40

40

1.9

Net cash from / (used in) operating activities

(458)

(458)


2.

Cash flows from investing activities



2.1

Payments to acquire:


(a)   entities


(b)   tenements




(c)   property, plant and equipment

(39)

(39)


(d)   exploration & evaluation (if capitalised)

(245)

(245)


(e)   investments




(f)    other non-current assets



2.2

Proceeds from the disposal of:




(a)   entities


(b)   tenements




(c)   property, plant and equipment




(d)   investments




(e)   other non-current assets



2.3

Cash flows from loans to other entities



2.4

Dividends received (see note 3)



2.5

Other (provide details if material)



2.6

Net cash from / (used in) investing activities

(284)

(284)


3.

Cash flows from financing activities

3,001

3,001

3.1

Proceeds from issues of equity securities (excluding convertible debt securities)

3.2

Proceeds from issue of convertible debt securities



3.3

Proceeds from exercise of options



3.4

Transaction costs related to issues of equity securities or convertible debt securities

(268)

(268)

3.5

Proceeds from borrowings



3.6

Repayment of borrowings



3.7

Transaction costs related to loans and borrowings



3.8

Dividends paid



3.9

Other (provide details if material)



3.10

Net cash from / (used in) financing activities

(2,733)

(2,733)


4.

Net increase / (decrease) in cash and cash equivalents for the period



4.1

Cash and cash equivalents at beginning of period

1,576

1,576

4.2

Net cash from / (used in) operating activities (item 1.9 above)

(458)

(458)

4.3

Net cash from / (used in) investing activities (item 2.6 above)

(284)

(284)

4.4

Net cash from / (used in) financing activities (item 3.10 above)

2,733

2,733

4.5

Effect of movement in exchange rates on cash held

8

8

4.6

Cash and cash equivalents at end of period

3,575

3,575

 

5.

Reconciliation of cash and cash equivalents
at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts

Current quarter
$A'000

Previous quarter
$A'000

5.1

Bank balances

3,575

1,576

5.2

Call deposits



5.3

Bank overdrafts



5.4

Other (provide details)



5.5

Cash and cash equivalents at end of quarter (should equal item 4.6 above)

3,575

1,576

 

6.

Payments to related parties of the entity and their associates

Current quarter
$A'000

6.1

Aggregate amount of payments to related parties and their associates included in item 1

141

6.2

Aggregate amount of payments to related parties and their associates included in item 2


Note: if any amounts are shown in items 6.1 or 6.2, your quarterly activity report must include a description of, and an explanation for, such payments

 

Item 6.1 includes payment of Directors salaries, fees and office rent.

 

7.

Financing facilities
Note: the term "facility' includes all forms of financing arrangements available to the entity.

Add notes as necessary for an understanding of the sources of finance available to the entity.

Total facility amount at quarter end
$A'000

Amount drawn at quarter end
$A'000

7.1

Loan facilities

-

-

7.2

Credit standby arrangements

-

-

7.3

Other (please specify)

-

-

7.4

Total financing facilities

-

-




7.5

Unused financing facilities available at quarter end

-

7.6

Include in the box below a description of each facility above, including the lender, interest rate, maturity date and whether it is secured or unsecured. If any additional financing facilities have been entered into or are proposed to be entered into after quarter end, include a note providing details of those facilities as well.

 

 

 

 

8.

Estimated cash available for future operating activities

$A'000

8.1

Net cash from / (used in) operating activities (Item 1.9)

458

8.2

Capitalised exploration & evaluation (Item 2.1(d))

245

8.3

Total relevant outgoings (Item 8.1 + Item 8.2)

703

8.4

Cash and cash equivalents at quarter end (Item 4.6)

3,575

8.5

Unused finance facilities available at quarter end (Item 7.5)

-

8.6

Total available funding (Item 8.4 + Item 8.5)

3,575

8.7

5

8.8

If Item 8.7 is less than 2 quarters, please provide answers to the following questions:


1.         Does the entity expect that it will continue to have the current level of net operating cash flows for the time being and, if not, why not?


Answer:

 


2.         Has the entity taken any steps, or does it propose to take any steps, to raise further cash to fund its operations and, if so, what are those steps and how likely does it believe that they will be successful?


Answer:

 


3.         Does the entity expect to be able to continue its operations and to meet its business objectives and, if so, on what basis?


Answer:

 

 

Compliance statement

1        This statement has been prepared in accordance with accounting standards and policies which comply with Listing Rule 19.11A.

2        This statement gives a true and fair view of the matters disclosed.

 

 

Date:                ......29/10/2020..........................................................

 

 

Authorised by:  .....By the Board.........................................................

(Name of body or officer authorising release - see note 4)

 

Notes

1.          This quarterly cash flow report and the accompanying activity report provide a basis for informing the market about the entity's activities for the past quarter, how they have been financed and the effect this has had on its cash position. An entity that wishes to disclose additional information over and above the minimum required under the Listing Rules is encouraged to do so.

2.          If this quarterly cash flow report has been prepared in accordance with Australian Accounting Standards, the definitions in, and provisions of, AASB 6: Exploration for and Evaluation of Mineral Resources and AASB 107: Statement of Cash Flows apply to this report. If this quarterly cash flow report has been prepared in accordance with other accounting standards agreed by ASX pursuant to Listing Rule 19.11A, the corresponding equivalent standards apply to this report.

3.          Dividends received may be classified either as cash flows from operating activities or cash flows from investing activities, depending on the accounting policy of the entity.

4.          If this report has been authorised for release to the market by your board of directors, you can insert here: "By the board". If it has been authorised for release to the market by a committee of your board of directors, you can insert here: "By the [name of board committee - eg Audit and Risk Committee]". If it has been authorised for release to the market by a disclosure committee, you can insert here: "By the Disclosure Committee".

5.          If this report has been authorised for release to the market by your board of directors and you wish to hold yourself out as complying with recommendation 4.2 of the ASX Corporate Governance Council's Corporate Governance Principles and Recommendations, the board should have received a declaration from its CEO and CFO that, in their opinion, the financial records of the entity have been properly maintained, that this report complies with the appropriate accounting standards and gives a true and fair view of the cash flows of the entity, and that their opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively.

 

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