OPERATIONAL REPORT - QUARTER ENDING 30 JUNE 2017

RNS Number : 4419L

Tlou Energy Ltd

19 July 2017

 

19 July 2017

Tlou Energy Limited

("Tlou" or "the Company")

OPERATIONAL REPORT - QUARTER ENDING 30 JUNE 2017

Tlou Energy Limited, the AIM and ASX listed company focused on delivering power in Botswana and southern Africa through the development of coal bed methane ('CBM'), is pleased to provide its operational report in respect to its Lesedi CBM Project in Botswana ("Lesedi") for the quarter ended 30 June 2017.

Highlights

• Contract for 250km seismic survey signed to commence in Q3 with aim to increase Gas Reserves and     Resources
• Mining Licence application lodged
• First power generated from CBM following the installation of a Gas Generator - providing reduced spend     on diesel and a proof of concept of 'first gas monetisation'
• Board bolstered with appointment of Non-Executive Director Hugh Swire and post quarter end the appointment of Ms. Linah Mohohlo

TLOU ENERGY LIMITED PROJECTS

Lesedi CBM Project Area, Botswana

PLs 001-003/2004 and PLs 35 & 37/2000

Tlou Energy Limited 100%

The Lesedi project consists of five CBM prospecting licences in Botswana covering an area of approximately 3,800km².  These licences are currently the focal point for the Company's operations and include the Selemo pilot project where the Company has been producing gas for approximately 12 months. 

The status of the five Lesedi Area Prospecting Licences is as follows:

Prospecting Licence	Expiry	Status
PL 001/2004	March 2019	Current
PL 002/2004	March 2019	Current
PL 003/2004	March 2019	Current
PL 035/2000	September 2018	Current
PL 037/2000	September 2018	Current

Contract for 250km seismic survey signed

The Company entered into a contract for a 250 km 2D seismic program with Velseis Pty Ltd, an Australian seismic acquisition and processing company providing a fully integrated range of seismic technologies.  Velseis has built a reputation as the leading Australian contractor in this field, with over 25 years of experience throughout the Asia-Pacific Region.  The seismic program is scheduled to commence in Q3, 2017.  It is envisaged this survey will give the Company the opportunity to expand its gas reserves and resources as it progresses towards developing the first CBM gas to power project in Botswana.

The seismic survey will assist in the next step of Tlou's plan to drill more wells by providing it with enhanced knowledge of the sub-surface in its project areas.  The results along with the data from the subsequent planned core well program may also lead to further gas reserves and contingent resources being certified.

Tlou lodges Mining Licence Application for the Lesedi CBM project with the Ministry

The Company lodged a Mining Licence Application for the Lesedi CBM project with Botswana's Department of Mines in the Ministry of Mineral Resources, Green Technology and Energy Security ("the Ministry").  The Mining Licence for the Lesedi CBM Project is the first application of its kind to be lodged in Botswana.

In Botswana, holders of Prospecting Licences ("PL") are issued Mining Licences once exploration on a relevant Prospecting Licence has been concluded and the holder of the Prospecting Licence is ready to commence commercial production.  Mining Licences are assessed in accordance with the prescribed statutory requirements of the Botswana Mines and Minerals Act.  Two major components of a Mining Licence application are an approved EIA (granted for the Lesedi Project in September 2016) and a feasibility study for the relevant project.

Some of the benefits of a Prospecting Licence being converted into a Mining Licence include:

1.    Tenure: The permit being converted from a short-term Prospecting Licence tenure (2-3 years) to a longer-term tenure (20+ years).

2.    Commercial rights: A Mining Licence affords the holder the legal right to sell the resource for which the licence has been granted. The granting of a Mining Licence is therefore a pre-requisite to commercialising a gas resource.    

The award of the Mining Licence will be another milestone for the Company which further enhances the first mover advantage to develop a Gas-to-Power project in the country.  The issue of a Mining Licence will pioneer the development of a new and exciting natural CBM gas industry in Botswana, an industry that will lead to a new indigenous source of energy and employment for the country.  Over time, it will potentially allow new manufacturing industries to develop using Botswana CBM gas and facilitate the creation of a new renewable energy industry.  This is due to gas being a relatively clean and cost-effective way to provide peaking power to complement the often-intermittent nature of renewable energy. 

Conversion of field generation from diesel to gas

The Company generated its first power from CBM at its field in Botswana following the installation of a Gas Generator at the Selemo project area.

Power required to run pumps and metering at the Selemo wells was previously supplied by diesel generators.  During the quarter, the Company's operations team replaced a diesel generator with a new gas fired generator, running on the gas being produced from Tlou's wells.  This is the first Gas-to-Power via Tlou's CBM, and is a significant milestone for the Company and in effect a proof of concept of 'first gas monetisation'.  This achievement reinforces Tlou's view that CBM Gas-to-Power is achievable in Botswana using gas from the Lesedi Project.

The Cummins G8.3 generator can supply up to 60 kVA of power and has been customised to run on a small portion of the gas currently being produced at the Selemo pilot which would otherwise be flared. It is expected that the conversion of generation from diesel to gas will initially reduce the Company's diesel requirements by approximately 50,000 litres per year. These savings should grow with time given that a second gas to power generation unit is planned to be installed.

Mamba Project Area, Botswana

PLs 237-241/2014

Tlou Energy Limited 100%

The Mamba project consists of five CBM prospecting licences in Botswana covering an area of approximately 4,500km².  The Mamba area is considered to be highly prospective being situated adjacent to Tlou's Lesedi CBM Project and being on-trend with the encouraging results observed to date.  In the event of a gas field development by Tlou, the Mamba area provides the Company with considerable flexibility and optionality. 

Renewal applications were submitted for the Mamba licences in March 2017.  The Company has received confirmation from the Department of Mines that they were unable to complete their review of the renewal application prior to the end of June but undertook to expedite their review as soon as possible.

The status of the Mamba Area Prospecting Licences is as follows:

Licence	Expiry	Status
PL 237/2014	June 2017	Renewal Application submitted - March 2017
PL 238/2014	June 2017	Renewal Application submitted - March 2017
PL 239/2014	June 2017	Renewal Application submitted - March 2017
PL 240/2014	June 2017	Renewal Application submitted - March 2017
PL 241/2014	June 2017	Renewal Application submitted - March 2017

Corporate

In June 2017 the Company was pleased to announce that Mr Hugh William Swire was appointed to the Board as a Non-Executive Director.

Hugh, aged 37, is a partner in Mahon China, an established investment management and advisory partnership based in Beijing.  Active in China since 1985, Mahon China have over three decades of experience advising foreign companies with investments and corporate activities in China.

Hugh has expert knowledge and direct investment experience in the low carbon water, energy and technology sectors having completed and exited investments into several leading companies in the low carbon sector.  Hugh travels to China regularly and using his Chinese language skills after graduating from Oxford University with a BA (Hons) in Chinese.

Post end of the quarter, Ms Linah Mohohlo, was also appointed to the Board as a Non-Executive Director.  Ms. Mohohlo is the former Governor of the Bank of Botswana, holds a Bachelors Degree in Economics from The George Washington University, Washington DC, a Masters Degree in Finance and Investment from University of Exeter, UK and a Diploma in Accounting and Business Studies from the University of Botswana.

New Ventures

While Tlou is focussed on the Lesedi CBM project, the Company will continue looking at potential areas of expansion should the possibility arise.

****

Anthony Gilby

Managing Director

Tlou Energy Limited

Website: www.tlouenergy.com

For further information regarding this announcement please contact:

Tlou Energy Limited	[phone]
Tony Gilby, Managing Director
Solomon Rowland, Company Secretary
Grant Thornton (Nominated Adviser)	[phone]
Samantha Harrison, Colin Aaronson, Harrison Clarke
Shore Capital (Joint Broker)	[phone]
Jerry Keen, Mark Percy, Toby Gibbs
Optiva Securities Limited (Joint Broker)	[phone]
Jeremy King, Christian Dennis
St Brides Partners Limited (Public Relations)	[phone]
Lottie Brocklehurst, Megan Dennison
FlowComms Limited (Investor Relations)	[phone]
Sasha Sethi

Company Information

Tlou Energy is an AIM and ASX listed company focused on delivering power in Botswana through the development of coal bed methane ('CBM') gas.  Botswana has a severe energy shortage and is currently relying on expensive imported power and diesel generation to deliver its requirements.  However, as the 100% owners of the most advanced gas project in the country, the Lesedi CBM Project, Tlou Energy provides investors with access to a compelling immediate and longer-term opportunity using domestic gas to produce power and displace expensive diesel and import power market.

The Company is led by an experienced Board, management and advisory team including individuals with successful track records in the Australian CBM industry.

Since establishment in 2009, the Company has significantly de-risked the project in consideration of its goal to become a significant gas to power producer.  The Company has the most advanced CBM project in Botswana and flared its first gas in 2014.  It holds 10 Prospecting Licences covering an area of ~8,300Km² and the Lesedi Project already benefits from significant independently certified Contingent Gas Resources of ~3.2 trillion cubic feet (3C) and independently certified Gas Reserves.

The Company is planning an initial scalable gas-to-power project in Botswana.  Following successful implementation of this first scalable project, the Company plans to expand to provide further power to Botswana and the southern African region.

+Rule 5.5

Appendix 5B

Mining exploration entity and oil and gas exploration entity quarterly report

Introduced 01/07/96  Origin Appendix 8  Amended 01/07/97, 01/07/98, 30/09/01, 01/06/10, 17/12/10, 01/05/13, 01/09/16

Name of entity
Tlou Energy Limited
ABN		Quarter ended ("current quarter")
79 136 739 967		30 June 2017

Consolidated statement of cash flows			Current quarter $A'000	Year to date (12 months) $A'000
1.	Cash flows from operating activities
1.1	Receipts from customers
1.2	Payments for		(199)	(1,612)
	(a)   exploration & evaluation
	(b)   development
	(c)   production
	(d)   staff costs		(328)	(1,025)
	(e)   administration and corporate costs		(326)	(1,364)
1.3	Dividends received (see note 3)
1.4	Interest received		1	2
1.5	Interest and other costs of finance paid
1.6	Income taxes paid
1.7	Research and development refunds
1.8	Other (GST refunds, Share related expenditure as per AASB 132)		(268)	(199)
1.9	Net cash from / (used in) operating activities		(1,120)	(4,198)
2.		Cash flows from investing activities
2.1		Payments to acquire:
		(a)   property, plant and equipment
		(b)   tenements (see item 10)
		(c)   investments
		(d)   other non-current assets
2.2		Proceeds from the disposal of:	(97)	(101)
		(a)   property, plant and equipment
		(b)   tenements (see item 10)
		(c)   investments
		(d)   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	(97)	(101)
3.		Cash flows from financing activities	6,292	9,939
3.1		Proceeds from issues of shares
3.2		Proceeds from issue of convertible notes
3.3		Proceeds from exercise of share options
3.4		Transaction costs related to issues of shares, convertible notes or options	(27)	(162)
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	6,265	9,777
4.		Net increase / (decrease) in cash and cash equivalents for the period	1,748	1,224
4.1		Cash and cash equivalents at beginning of period
4.2		Net cash from / (used in) operating activities (item 1.9 above)	(1,120)	(4,198)
4.3		Net cash from / (used in) investing activities (item 2.6 above)	(97)	(101)
4.4		Net cash from / (used in) financing activities (item 3.10 above)	6,265	9,777
4.5		Effect of movement in exchange rates on cash held	(69)	25
4.6		Cash and cash equivalents at end of period	6,727	6,727

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	6,727	1,748
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)	6,727	1,748

6.	Payments to directors of the entity and their associates	Current quarter $A'000
6.1	Aggregate amount of payments to these parties included in item 1.2	174
6.2	Aggregate amount of cash flow from loans to these parties included in item 2.3
6.3	Include below any explanation necessary to understand the transactions included in items 6.1 and 6.2
Office rent, Directors fees and salaries

7.	Payments to related entities of the entity and their associates	Current quarter $A'000
7.1	Aggregate amount of payments to these parties included in item 1.2
7.2	Aggregate amount of cash flow from loans to these parties included in item 2.3
7.3	Include below any explanation necessary to understand the transactions included in items 7.1 and 7.2

8.	Financing facilities available Add notes as necessary for an understanding of the position	Total facility amount at quarter end $A'000	Amount drawn at quarter end $A'000
8.1	Loan facilities
8.2	Credit standby arrangements
8.3	Other (please specify)
8.4	Include below a description of each facility above, including the lender, interest rate and whether it is secured or unsecured. If any additional facilities have been entered into or are proposed to be entered into after quarter end, include details of those facilities as well.

9.	Estimated cash outflows for next quarter	$A'000
9.1	Exploration and evaluation	867
9.2	Development
9.3	Production
9.4	Staff costs	293
9.5	Administration and corporate costs	471
9.6	Other (Share related expenditure as per AASB 132)	184
9.7	Total estimated cash outflows	1,815

10.	Changes in tenements (items 2.1(b) and 2.2(b) above)	Tenement reference and location	Nature of interest	Interest at beginning of quarter	Interest at end of quarter
10.1	Interests in mining tenements and petroleum tenements lapsed, relinquished or reduced
10.2	Interests in mining tenements and petroleum tenements acquired or increased

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.

Sign here:         ..........Solomon Rowland.............                    Date: .....19 July 2017.....

(Director/Company secretary)

Print name:       ...... Solomon Rowland................

Notes

1.     The quarterly report provides a basis for informing the market how the entity's activities have been financed for the past quarter and the effect on its cash position. An entity that wishes to disclose additional information is encouraged to do so, in a note or notes included in or attached to this report.

2.     If this quarterly 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 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.

 

END

 

 

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