Rukwa Definitive Mining Feasibility Study

RNS Number : 1666Z

Kibo Mining Plc

09 December 2014

 



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: IE00B61XQX41

("Kibo" or "the Company")

 

Dated: 09 December 2014

Rukwa Definitive Mining Feasibility Study - Phase 1, Stage 1 Report Findings

Kibo Mining plc ("Kibo" or the "Company") (AIM: KIBO; AltX: KBO), the Tanzania focussed mineral exploration and development company, is pleased to announce the findings from Phase 1, Stage 1 of the Company commissioned Definitive Mining Feasibility Study (DMFS), concerning the mining element of the Rukwa Coal to Power Project (RCPP). The Executive Summary of the DMFS Phase 1, Stage 1 Report is available on Kibo's website at www.kibomining.com.

Key highlights

-     Four alternative options identified for project development with the project financially feasible for all of the options investigated;

-     Annual estimated coal sale revenues of between US$39million and US$43million assuming annual sales 1.6m tonnes;

-     All-in Cost Margin ranges from 38% to 45%. Applying the aforementioned All - in Cost Margin, Kibo interprets that an annual margin of between US$14.8 million to $19.4 million will be generated;

-     Applying a real discount rate of 5.7% the best estimated Net Present Value ranges from US$116million to US$141million.

Louis Coetzee, CEO of Kibo Mining, said "We are delighted to deliver this DMFS update to investors.  The report is highly significant in numerous areas but notably in respect of the All-in Cost Margin range of 38% to 45%, which is significantly above the 25% level considered "healthy" for this type of project.    

We are also delighted with the estimated Net Present Value range of US$116million to US$141million, which demonstrates the value of just one component of Kibo Mining's assets. 

The All-in Cost Margin and Net Present Value ranges are particularly impressive given the very prudent assumptions applied.  This is evidenced by the use of coal pricing significantly below the current market price reflecting the robust economies of this project as well as the prudent initial DMFS assumptions.  As a result, this represents a base case valuation for the project. 

Furthermore, we would note that this valuation, pertaining as it does to the coal mining element of the RCPP, is solely in respect of an input (i.e. coal supply) to power generation.  The power element is expected to be considerably more substantial in terms of operational revenues and its proportionate significance in respect of the economic potential of the RCPP. 

We expect receipt of the final Power Pre-Feasibility Study shortly and will update investors on the report and its findings when received."

Important Notes for Readers:

The information contained within this report is taken from the DMFS Phase 1, Stage 1 report produced by Minxcon Projects in respect of the RCPP. 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 RCPP 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 RCPP to which this work relates and not as a generic benchmark standard.

Further information with regard to the RCPP and a copy of the Executive Summary of the DMFS Phase 1, Stage 1 report is available on the Company's website at www.kibomining.com. 

DMFS Phase 1, Stage 1 - Executive Summary Extracts and Commentary

The Definitive Mining Feasibility Study - Rukwa Coal to Power Project:

Minxcon (Pty) Ltd ("Minxcon") was commissioned by Kibo Mining Plc ("Kibo" or the "Client") to compile a Definitive Mining Feasibility Study ("DMFS") on the Rukwa Coal to Power Project ("RCPP" or "Project"). The intended Rukwa Coal Mine is located in south-western Tanzania, approximately 70 km northwest of the regional capital of Mbeya. This Report forms part of the total DMFS which aims to design and plan the establishment and construction of the Rukwa Coal Mine.

DMFS Deliverable:

The main deliverable of Phase 1, Stage 1 of the DMFS, the "Concept Study Report" is a report providing an independent assessment on an order of magnitude level of detail. Execution of the Concept Study forms part of an integrated project development process for the RCPP and is informed by the independent technical report on the Rukwa Coal Resource, as well as the information contained in the RCPP Information Memorandum ("Summary of Investment Opportunity"). In the Concept Study Report Minxcon made important recommendations to assist Kibo to complete the Definitive Mining Feasibility Study ("DMFS") to an appropriate level of detail.

Financial summary:

-     four alternative options identified for project development (the financial data ranges that follow are dependent on which of the project development options is selected);

-     the Project is financially feasible for all of the options investigated;

-     the Project has been currently assessed over a 27 year mine life, with an average annual coal production of 1.48million tonnes over the life of mine;

-     annual coal sale revenues are estimated at US$37million to US$44million;

-     the All-in Cost Margin ranges from 38% to 45% of revenue;

-     All-in Cost Margin ranges from 38% to 45%. Applying the aforementioned All - in Cost Margin, Kibo interprets that an annual margin of between US$14.8 million to $19.4 million will be generated;

-     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;

-     the high all-in cost margin is an indication of the robustness of the Project;

-     capital investment of between US$46 million and US$89 million;

-     payback period for the Project is estimated at between 3.9 and 4.7 years;

-     applying a real discount rate of 5.7% the best estimated Net Present Value ranges from US$116 million to US$141 million.

Coal Mineral Resource:

Mineral Resource classification and reporting has been conducted in accordance with the requirements of NI 43-101 by Geological Exploration Mining Evaluation Consulting Services (Pty) Limited ("GEMECS") who has reviewed the coal properties in accordance to the terms, definitions and guidelines provided in "A Standardized Coal Resource/Reserve Reporting System for Canada". The estimated Coal Inferred and Indicated Mineral Resources are outlined in the 'Rukwa Mineral Resource Section' outlined underneath the 'Notes for Editors' section below.

Capital Footprint and Battery Limits:

The Capital Footprint and Battery Limits for the mine and plant includes the opencast pit, mining and processing equipment, mining and plant buildings, all mining stockpiles, coal product conveyor to power plant, electrical supply to and reticulation within the mine and plant area, excess water pipeline to power plant, staff accommodation and communication systems to and reticulation within the mine and plant area.  The power plant's Battery Limits (excluded from Minxcon's Battery Limits) include everything inside their security fence or boundary, electrical power lines, ash storage dams as well as a water line from Lake Rukwa.  The mine will be responsible for the construction of all items that fall within its capital footprint as well as various infrastructure leading up to the new envisioned power plant.

Mining and Processing Options:

Four different options were investigated during the mining concept study, which will be further analysed in Phase 2 of Stage 1 of the DMFS. The differences in the 4 options are mainly applicable to alterations in mining operating costs and mining capital costs, as well as 2 different plant options.  

• Option 1 (Contractor Mining, Crusher-Only);

• Option 2 (Contractor Mining, De-stoning Plant);

• Option 3 (Owner Operated Mining, De-stoning Plant); and

• Option 4 (Surface Miner, De-stoning Plant excl Crusher).

All these options described above were valued through Minxcon's discounted cash flow ("DCF") model to demonstrate the viability and justifiability of extraction of coal under a defined set of realistically-assumed modifying factors.

There exist 7 different coal seams for the Rukwa Coal Mine.  It is clear that a constant coal production over the total Life of Mine ("LoM") can be achieved.

Capital Expenditure:

All costs were sourced from actual quotations as provided by the Original Equipment Manufacturers ("OEMs") and/or from retail companies. Where quotations could not be sourced, historical costs and quotations were escalated to align with the current financial year and market inflation figures. Detail about the capital is described in the relevant mining and plant reports.

It was assumed that the fleet would be replaced every five years at 70% of original fleet cost in the capital schedule for Option 3 and Option 4.

Discounted Cash Flow Modelling:

In generating the financial model and deriving the valuations, the Free Cash Flow to Company - DCF valuation was set up in calendar years ending December. A discount rate of 5.73% (in real terms) was calculated for the discount factor, but the NPV was also shown for a range of discount rates. The full intrinsic value of the operation was reported - no attributable value was calculated. The coal prices were sourced from the client and are based on the expected price Rukwa will receive from the power plant that would start operations in parallel with the mine. For the purpose of the financial model the coal prices were constant throughout the LoM.

Project Key Risks:

The business of mining and mineral exploration and production by their nature contain significant operational risks.  The business depends upon, amongst other things, successful prospecting programmes and competent management.  Profitability and asset values can be affected by unforeseen changes in operating circumstances and technical issues. 

Factors such as political and industrial disruption, currency fluctuation and interest rates could have an impact on future operations, and potential revenue streams can also be affected by these factors.  The majority of these factors are, and will be, beyond the control of any operating entity. 

The Project is identified as being most sensitive to the coal price and operating costs.

Contacts

Louis Coetzee	[phone]	Kibo Mining plc	Chief Executive Officer
Andreas Lianos	[phone]	River Group	Corporate Adviser and Designated Adviser on JSE
Jon Belliss Abigail Wayne	[phone]	Hume Capital Securities Plc	Broker
Oliver Morse and Trinity McIntyre	[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 NI43-101 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 (DMFS) and a Power Pre-Feasibility Study (PPFS) for Rukwa with initial findings for the PPFS to be released in the near term.

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 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, with Preliminary Economic Assessment study findings to be released in the near term.

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.

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

09 December 2014

Corporate and Designated Adviser

River Group

 

 

END

 

 

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