Quarterly Activities Report q/e 30 June 2024

Tlou Energy Ltd

26 July 2024

 

26 July 2024

Tlou Energy Limited

("Tlou" or "the Company")

Quarterly Activities Report for the quarter ended 30 June 2024

Highlights

Ø Work at Lesedi progressing to plan and targeting first power generation later this year

Ø Lesedi electrical substation is ~64% complete with expected completion in 3Q 2024

Ø Gas flowing at Lesedi 6 production pod, work-over completed on the Lesedi 4 pod

Ø Power generation setup and installation options being agreed with suppliers

Lesedi Project

Lesedi is Tlou's most advanced project. Work has been ongoing at Lesedi for some time with the project targeting first power generation later this year.

Lesedi remains at the forefront of Botswana's gas to power sector, making substantial progress in the development of the proposed 10MW gas-to-power project.

The Lesedi development involves the following key elements:

·    Gas production

·    Electricity generation

·    Substation construction

·    Transmission and sale of electricity

The status of each of the above at the end of the reporting quarter is outlined below.

Gas production

Coalbed methane gas from the Company's gas field in central Botswana will be used for power generation.

To produce gas, the Company drills dual lateral production wells referred to as "pods" which consist of a vertical production well and two lateral wells that intersect the production well. The Company currently has two production pods, Lesedi 4 and Lesedi 6. Both pods have produced gas for a sustained period. Lesedi 6 remains in production while Lesedi 4 has been flushed clean of coal fines that periodically build-up and brought back into production post quarter end.

Lesedi 4 and Lesedi 6 will provide the initial gas for power generation. Further pods are planned to be drilled once funding is in place, with discussions ongoing with debt providers during the quarter. Preparatory work for the next drilling campaign has already begun. Additional pods will provide further gas allowing the Company to scale up in a stepwise manner using gas production to expand electricity generation and associated revenue.

Once drilled, a pod needs to be dewatered which involves removing water from the target coal seam and thereafter gas flow increases. As more and more pods are drilled the coal will get progressively dewatered which should aid future gas production.

Lesedi 4 vertical production well - July 2024

Electricity Generation

Electricity will be generated on site and sold into the national power grid in Botswana. Power will be sold to Botswana Power Corporation (BPC) under an agreed 10MW Power Purchase Agreement (PPA).

The project is planned to grow incrementally to satisfy the 10MW PPA and then expand further. First generation will be from gas produced at Lesedi 4 and Lesedi 6 with further generation units planned to be added as additional gas is produced.

During the quarter the Company has been working with suppliers in relation to the final design, site setup and delivery options for the initial generators which are planned to arrive in the coming months.

Gas produced from each pod is gathered and piped to the power generators. Work on the gas gathering network began in the previous quarter and continued into this reporting period. The gas gathering lines can be finalised once the generators are onsite.

Substation Construction

Electricity produced by the generators will be fed into the electrical substation which is under construction at the Lesedi site.

The substation is approximately 64% complete and has been designed to support over 20MW of power. The substation is scheduled for completion in September 2024.

Control room and transformer plinth construction at the Lesedi substation - July 2024

Transmission Line Construction

To connect to the national grid, the Company constructed a 100km 66kV transmission line that will tie into the substation at Lesedi and join the existing power grid at the town of Serowe.

As previously reported, construction of the transmission line has been completed with minor finishing works and the addition of switchgear at the Serowe end to be done prior to the line being energized. The line remains under care and maintenance until energization.

A 66kV line is capable of carrying ~25MW of power. This would allow the company to rapidly expand beyond 10MW.

Lesedi project licences

The project area has four Prospecting Licenses (PL) and a Production Licence which is the focus area for the development of Tlou's independently certified gas reserves and contingent resources. The table below summarises the status of the Lesedi licences:

Licence	Expiry	Status
Production Licence 2017/18L	Aug-42	Current
PL001/2004	Mar-26	Current
PL003/2004	Mar-26	Current
PL035/2000	Mar-25	Current
PL037/2000	Mar-25	Current

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Other Project Areas

In addition to the Lesedi project the company has two other areas of interest adjacent to Lesedi known as the Mamba and Boomslang projects.

Mamba Project

The Mamba project is in the exploration and evaluation phase with further operations required on the licences. It consists of five Prospecting Licences covering an area of approximately 4,500 Km². In the event of successful drilling results at Mamba, it is envisioned that this area would be developed as a separate project from Lesedi. The Mamba area provides the Company with flexibility and optionality. The status of the Mamba licences are as follows:

Licence	Expiry	Status
PL 237/2014	Dec-25	Current
PL 238/2014	Dec-25	Current
PL 239/2014	Dec-25	Current
PL 240/2014	Dec-25	Current
PL 241/2014	Mar-26	Current

Further work on the Mamba project is proposed once the Lesedi project is in production with initial work likely to include a seismic survey and the drilling of core-holes.

Boomslang Project

Prospecting Licence, PL011/2019 designated "Boomslang", is approximately 1,000 Km². To date, the Company has not carried out ground operations in the Boomslang area. Like the Mamba project the first stage of operations is likely to include a seismic survey following by core-hole drilling.

The status of the Boomslang licence is as follows:

Licence	Expiry	Status
PL 011/2019	Jun-26	Current

PL renewal applications are submitted three months prior to expiration.

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Cash Position

At the end of the quarter the Company had ~A$2.52m cash on hand (unaudited). The aggregate value of payments to related parties and their associates of A$340k for the quarter (shown in item 6.1 of the Quarterly Cashflow Report) relates to directors' salaries and fees (including tax and superannuation payments made on their behalf) and office rent.

The information contained within this announcement is deemed to constitute inside information as stipulated under the retained EU law version of the Market Abuse Regulation (EU) No. 596/2014 (the "UK MAR") which is part of UK law by virtue of the European Union (withdrawal) Act 2018. The information is disclosed in accordance with the Company's obligations under Article 17 of the UK MAR. 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

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For further information regarding this announcement please contact:

Tlou Energy Limited	[phone]
Tony Gilby, Managing Director
Solomon Rowland, General Manager
Grant Thornton (Nominated Adviser)	[phone]
Harrison Clarke, Colin Aaronson, Elliot Peters
Zeus Capital (UK Broker)	[phone]
Simon Johnson
Investor Relations
Ashley Seller (Australia)	[phone]
FlowComms Ltd - Sasha Sethi (UK)	[phone]

About Tlou

Tlou is developing energy solutions in Sub-Saharan Africa through gas-fired power and ancillary projects. The Company is listed on the ASX (Australia), AIM (UK) and the BSE (Botswana). The Lesedi Gas-to-Power Project ("Lesedi") is 100% owned and is the Company's most advanced project. Tlou's competitive advantages include the ability to drill cost effectively for gas, operational experience and Lesedi's strategic location in relation to energy customers. All major government approvals have been achieved.

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. Save as required by any applicable law or regulation, 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 June 2024

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
	(a)   exploration & evaluation
	(b)   development
	(c)   production
	(d)   staff costs	(434)	(1,220)
	(e)   administration and corporate costs	(703)	(1,867)
1.3	Dividends received (see note 3)
1.4	Interest received	1	13
1.5	Interest and other costs of finance paid
1.6	Income taxes paid
1.7	Government grants and tax incentives
1.8	Other (provide details if material)	15	129
1.9	Net cash from / (used in) operating activities	(1,120)	(2,945)
2.	Cash flows from investing activities
2.1	Payments to acquire or for:
	(a)   entities
	(b)   tenements
	(c)   property, plant and equipment	401	(709)
	(d)   exploration & evaluation	(3,316)	(12,606)
	(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	(2,915)	(13,315)
3.	Cash flows from financing activities	560	8,480
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	(11)	(88)
3.5	Proceeds from borrowings		3,570
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)	(5)	(19)
3.10	Net cash from / (used in) financing activities	545	11,944
4.	Net increase / (decrease) in cash and cash equivalents for the period
4.1	Cash and cash equivalents at beginning of period	5,976	6,851
4.2	Net cash from / (used in) operating activities (item 1.9 above)	(1,120)	(2,945)
4.3	Net cash from / (used in) investing activities (item 2.6 above)	(2,915)	(13,315)
4.4	Net cash from / (used in) financing activities (item 3.10 above)	545	11,944
4.5	Effect of movement in exchange rates on cash held	31	(19)
4.6	Cash and cash equivalents at end of period	2,517	2,517

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	2,517	5,976
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)	2,517	5,976

 

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	340
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.

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	1,000	480
7.2	Credit standby arrangements
7.3	Other (please specify)
7.4	Total financing facilities	1,000	480
7.5	Unused financing facilities available at quarter end		520
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.
	ILC BC Pty Ltd (the "Financier") has provided an unsecured loan facility that enables Tlou Energy Limited (the "Borrower") to seek advances from time to time from the Financier up to a maximum amount of A$1 million or such higher amount as the Financier might in future agree in writing. Interest is charged at 10% per annum on amounts drawn down. The loan is repayable 10 Business Days after the Financier requests payment of all outstanding amounts from the Borrower or when the Borrower elects to repay the Financier all outstanding amounts.

8.	Estimated cash available for future operating activities	$A'000
8.1	Net cash from / (used in) operating activities (item 1.9)	1,120
8.2	(Payments for exploration & evaluation classified as investing activities) (item 2.1(d))	3,316
8.3	Total relevant outgoings (item 8.1 + item 8.2)	4,436
8.4	Cash and cash equivalents at quarter end (item 4.6)	2,516
8.5	Unused finance facilities available at quarter end (item 7.5)	520
8.6	Total available funding (item 8.4 + item 8.5)	3,036
8.7	Estimated quarters of funding available (item 8.6 divided by item 8.3)	0.7
	Note: if the entity has reported positive relevant outgoings (ie a net cash inflow) in item 8.3, answer item 8.7 as "N/A". Otherwise, a figure for the estimated quarters of funding available must be included in item 8.7.
8.8	If item 8.7 is less than 2 quarters, please provide answers to the following questions:
	8.8.1     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: The net operating cash flow can fluctuate depending on operational requirements in a specific quarter. Is it expected that the next quarter will be similar to the level of net operating cash flows in this reporting period.
	8.8.2     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: The company is working on raising additional capital in the near term. Discussions are ongoing with debt providers looking at providing sufficient capital for the company to achieve its stated target of getting connected to the power grid in Botswana and selling electricity. The debt providers will need to complete their internal due diligence on the company prior to allocation of funds. Subject to the results of this due diligence, funds from one or more of these groups is expected in Q3 2024. In addition, the company may raise equity capital via a placement in advance of receiving debt funding if necessary. While indications from the debt providers and discussions with potential equity investors have been positive, the company cannot guarantee that sufficient capital will be raised either from debt providers or from a potential placement.
	8.8.3     Does the entity expect to be able to continue its operations and to meet its business objectives and, if so, on what basis?
	Answer: The company expects to be able to continue operations and meet business objectives should sufficient funds be received from the ongoing discussions. If not the company may need to delay or postpone planned activities until sufficient capital becomes available.
	Note: where item 8.7 is less than 2 quarters, all of questions 8.8.1, 8.8.2 and 8.8.3 above must be answered.

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:                .....26/07/2024...............................................................

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.

 

END