Quarterly Activities Report q/e 30 September 2024

Tlou Energy Ltd

30 October 2024

 

30 October 2024

Tlou Energy Limited

("Tlou" or "the Company")

Quarterly Activities Report for the quarter ended 30 September 2024

Ø Tlou's downstream activities including the grid connection power line, Lesedi & Serowe substations and generators are nearing completion

Ø Lesedi electrical substation is ~85% complete with expected completion by the end of the year

Ø Tier 1 power generation provider lined up to deliver infrastructure at Tlou's Lesedi Project when required

Ø Focus is now turning to the upstream to provide higher and more consistent gas flow rates

Ø Dr Ian Campbell (Tlou's largest shareholder) has indicated that he is willing to to provide funding during this time

Lesedi Substation Construction - October 2024

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 expected in mid-2025. 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 is located on Tlou's 40 Km²property. This property forms part of Tlou's 800 Km² mining (production) licence, which remains valid until 2042. Additionally, all prospecting licences due for renewal in the past year were successfully renewed. Tlou's prospecting licences span ~8,000 Km², ensuring our continuing exploration and development potential across a vast area. 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 which have produced gas at fluctuating rates.

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 Gas production status

Ø Coal fines (or particles) produced as part of the drilling and dewatering process have caused issues with the downhole pump and pod dewatering

Ø Tlou is now focusing on methods to maintain maximum water drawdown

Ø The objective of this process is to produce higher and more consistent gas flows for power generation over the coming months

Ø Once gas flow rates are maximised and generation is commissioned, the Company is of the opinion that it will be in a stronger position to seek external capital for expansion

Lesedi 4 and Lesedi 6 continue to flow gas however, rates fluctuate due to surging water and coal fines. The Company is investigating methods to manage the influx of coal fines which can jam the downhole pump making dewatering inconsistent. Well data, different pumping methods, pumps and pod configurations are all being reviewed by our operations team.

The next phase of production well drilling will then commence once the preferred method of dewatering and handling coal fines has been agreed and additional funding is in place.

Maintaining steady and consistent dewatering should allow the coal reservoir to deliver the highest and most consistent gas flow possible.

Generation

Tlou is in advanced discussions with a Tier 1 power generation provider to install a 10MW power generation facility using reciprocating 1,375 kW Cummins branded gas engines with GE generators.

It is envisaged that these units will be delivered, installed and commissioned by the provider, who will also handle ongoing operations and maintenance.

Power Generators are planned to be supplied and installed in phases, commensurate with gas production capacity.

Transmission Line

The 66kV power line connecting Lesedi to the Serowe substation is virtually complete and is designed to take up to 25MW of power.

Some minor finishing works, such as the addition of switchgear at the Serowe substation, will be carried out prior to the line being energized.

The power line is effectively under care and maintenance until Tlou is ready to bring it online. It will provide the Company with access to both the Botswana power market as well as the Southern African Power Pool.

Lesedi Substation

At the end of September 2024, the Lesedi substation was approximately 85% complete and Serowe extensions are ready for commissioning, with final completion anticipated later this year.

The Lesedi substation is designed for rapid expansion, enabling Tlou to scale from 10MW to 25MW as gas production increases, and subject to additional power purchase agreements.

Botswana Power Corporation is supplying the first 5MVA transformer to Tlou. Future expansion will require Tlou to procure and install larger transformers, such as two 20MVA transformers, which would allow up to 25MW of power with some system redundancy.

Lesedi Substation and Transmission Line connection

Power Sales

The power station is anticipated to be installed, commissioned and tested ready for approval by BPC ahead of first generation in 2025.

This is subject to receiving adequate financing and flowing sufficient and consistent gas from existing and proposed production wells.

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$944k cash on hand (unaudited). The aggregate value of payments to related parties and their associates of A$187k 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.

Dr Ian Campbell of ILC Investments Pty Limited, Tlou's largest shareholder, has indicated that he is willing to provide a loan facility to the Company up to A$5m to advance gas production operations. Further details will be released once the agreement is in place.

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 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 September 2024

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
	(b)   development
	(c)   production
	(d)   staff costs	(263)	(263)
	(e)   administration and corporate costs	(571)	(571)
1.3	Dividends received (see note 3)
1.4	Interest received	1	1
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)
1.9	Net cash from / (used in) operating activities	(833)	(833)
2.	Cash flows from investing activities
2.1	Payments to acquire or for:
	(a)   entities
	(b)   tenements
	(c)   property, plant and equipment
	(d)   exploration & evaluation	(1,740)	(1,740)
	(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	(1,740)	(1,740)
3.	Cash flows from financing activities	996	996
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
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)	(5)	(5)
3.10	Net cash from / (used in) financing activities	991	991
4.	Net increase / (decrease) in cash and cash equivalents for the period
4.1	Cash and cash equivalents at beginning of period	2,517	2,517
4.2	Net cash from / (used in) operating activities (item 1.9 above)	(833)	(833)
4.3	Net cash from / (used in) investing activities (item 2.6 above)	(1,740)	(1,740)
4.4	Net cash from / (used in) financing activities (item 3.10 above)	991	991
4.5	Effect of movement in exchange rates on cash held	9	9
4.6	Cash and cash equivalents at end of period	944	944

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	944	2,517
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)	944	2,517

 

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	187
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)	833
8.2	(Payments for exploration & evaluation classified as investing activities) (item 2.1(d))	1,740
8.3	Total relevant outgoings (item 8.1 + item 8.2)	2,573
8.4	Cash and cash equivalents at quarter end (item 4.6)	944
8.5	Unused finance facilities available at quarter end (item 7.5)	520
8.6	Total available funding (item 8.4 + item 8.5)	1,464
8.7	Estimated quarters of funding available (item 8.6 divided by item 8.3)	0.6
	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 potential funding partners that are interested in providing capital for the company to achieve its stated target of getting connected to the power grid in Botswana and selling electricity. Negotiations with potential partners has been positive but the company cannot guarantee that sufficient capital will be raised. The Company is also in advanced discussions with its largest shareholder to increase the current loan facility from ILC BC Pty Ltd from A$1m to A$5m to support the Company's ongoing gas production operations until another funding partner is secured.
	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 based on support from its largest shareholder or from funds raised via alternative sources. Any delay in funding may result in a delay or postponement of 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:                .....30/10/2024...............................................................

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