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Kibo Mining Share Price (KIBO)

Share Name Share Symbol Market Type Share ISIN Share Description
Kibo Mining LSE:KIBO London Ordinary Share IE00B97C0C31 ORD EUR0.015
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  +0.00p +0.00% 4.125p 4.00p 4.25p 4.125p 3.875p 4.125p 1,260,935 10:14:55
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m) RN NRN
Mining 0.0 2.1 1.0 4.1 14.02

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gilbly: SPV ASSET DISPOSAL OF MCPP. Further to post 36342, 17Jan LSE, on SPV assets this is an edited version. The calcs of the SPV assets sold such that the buyer and the Kibo sale cover or guarantee the 25% equity are taken from 17 Jan post. From prev. post re selling a % of the SPV assets and the amount Kibo retain, the values below are listed for the 4 equity cases considered (but not for the 7 share prices), only for the case for the SPV assets sold at the 25 cents or 16.34p per share price. (Added later - The case with the SPV assets sold off at the max price of $1.68 is now also included below). Selection of the required Equity funding as per 36342, but basically the first 3 scenarios are for an integrated Coal and Power project and the fourth scenario assumes Kibo own 100% of the Coal element and SPV asset disposal is calculated to cover the required equity funding for the POWER only. Scenario 4 is basically 25% of the combined Capex low value which gives $169.5m of equity funding required. Scenario 5 considers reduced equity from coal production after 1 year, a Coal loan, minus the loan payback and so we raise, $24m + $24m + $9.5m loan - £11.5m payback = $46 million over the 3 years. Of course this assumes we don’t have to raise all equity immediately, but only have to guarantee it. Equity needed is then $169.5m - $46m = $123.5m. Scenario 6 waives the loan payback until power is generated and so $11.5m reduces the equity needed to $112m. Scenario 7 assumes Coal element is 100% owned by Kibo and as hinted at by LC due to our robust figures, we borrow $9.5m and commence coal production. We payback a minimum of $2m for 2 years and dispose of SPV assets for the Power element ONLY. We raise $24m+$24m -$2m -$2m or $44m and so the equity funding becomes $160m - $44 or $116m. To recap, the calculation methology is ok, although the value of equity may be interpreted differently (it depends on how you see it) and the actual result is obviously dependant on the value attached to the SPV assets, which is an unknown factor at the moment. All I did was to consider an estimate of the equity, the price / share from $1.68 down to 25 cents (in 7 steps) and calculate the % of SPV assets that Kibo need to be sell such that the Buyer's % share and Kibo’s revenue from the sale, cover/guarntee the required 25% equity funding. Whatever the equity is estimated at. That was the purpose of the tables and these calculated the % and the equity amounts as shown. The table below lists the SPV asset sale info from 36342 and then we look at the profit based on the 4 Scenarios. The Table shows the case for a share value of 25 cents and lists, the % of SPV assets sold, the SPV revenue ($m), the buyers equity ($m) to be covered and the Kibo % covered by the asset sale. Scenarios 4 to 5 are for an integrated coal and power project whilst Scenario 7 assumes that the coal element is 100% owned by Kibo and we produce coal early and sell the SPV assets for the Power ONLY. Details in prev post. ………;……̷0;……R30;……230;…………………………...........…….…..…...Price....Price…..% SPV….....SPV…...Buyer $m....Kibo % ………;……̷0;……R30;……230;……………………………;…............….….....P ($)…...(p)R30;…..sold......Rev $m..…Equity230;…...Cover Scenario 4 Coal & Power Equity of $169.5m….0.25…...16.34…;...67.20...…55.60…....113.90…...32.80 Scenario 5 Coal & Power Equity of $123.5m..0.25....16.34…...59.88230;...49.55….....73.95…...40.12 Scenario 6 Coal & Power Equity of $112.0m….0.25…...16.34…;...57.51....47.59......64.41…...42.49 Scenario 7 Power Equity ONLY of $116.0m……;..0.25....16.34R30;...58.36…...48.30…..̷0;..67.70…...41.64 Scenario 7 considers that the Coal element is owned 100% by Kibo and they share a % the Power assets as above. Note in the table the % should add up to 100% and the amounts should cover the Equity required for that scenario. Profit consideration. So assuming that we have 1.5 cents/kwh for the power giving a power profit of $27.9m and $24m coal profit, then the Kibo profits for each of the 4 cases would be as follows for the 25 cent case . Scenario 4 with equity of $169.5m. C&P Profit = 32.8% × ($24m + $27.9m) = $17.02m. With 340m shares and on a P/E of 10, it is worth 33.3p a share. Scenario 5 with equity of $123.5m. C&P Profit = 40.12% × $51.9m = $20.82m. On a P/E of 10 worth 40.8p a share. Scenario 6 with equity of $112m. C&P Profit = 42.49% × $51.9m = $22.05m. On a P/E of 10 worth 43.2p a share. Scenario 7 with coal owned 100% and with Power ONLY equity of $116m. Profit = (41.64%x $27.9m)+$24m coal = $11.61m + $24m = $35.61m. On a P/E of 10 worth 69.8p a share. The last scenario shows that owning 100% of the Coal element and retaining 41.64% of the Power element, yields the highest profits, with the Scen 7 profit double Scen 4 profit for this case with the 25 cents share value. The difference between highest profit and lowest profit is $18.6m and rough share price differs by 36.5p. Note this is all based on the SPV asset disposal to ensure that the equity funding is raised by Kibo and the buyer, who must guarantee their equity funding for the % share purchased. Also it assumes only the lowest price of 25 cents or 16.34pence per share. Added later A second case was added later - The figures for the max. share value considered in selling off the SPV assets ($1.68/share) are shown below. This was added later as initially I felt it was too much a longer term view to get up to these share value levels. ………;……̷0;……R30;……230;…………………………...........…….…..…...Price....Price…..% SPV….....SPV…...Buyer $m....Kibo % ………;……̷0;……R30;……230;……………………………;…............….….....P ($)…...(p)R30;…..sold......Rev $m..…Equity230;…...Cover Scenario 4 Coal & Power Equity of $169.5m….1.68…..109.59…;...23.40...129.84….....39.66̷0;...76.60 Scenario 5 Coal & Power Equity of $123.5m..1.68...109.59…...18.20230;..101.02….....22.48…...81.80 Scenario 6 Coal & Power Equity of $112.0m….1.68…..109.59…;...16.79....93.19......18.81…...83.21 Scenario 7 Power Equity ONLY of $116.0m……;..1.68...109.59R30;...17.29…...95.95…..̷0;..20.05…...82.71 Scenario 7 considers that the Coal element is owned 100% by Kibo and they share a % the Power assets as above. Again based on a coal profit of $24m per year and $27.9m per year for the power for the % SPV retained the profits for the $1.68 case are : Scenario 4, with equity of $169.5m. Profit (C & P) = 76.6% × ($24m + $27.9m) = $39.76m. On a P/E of 10 worth 78p. Scenario 5 with equity of $123.5m. Profit(C & P) = 81.80% × $51.9m = $42.45m. On a P/E of 10 worth 83.2p. Scenario 6 with equity of $112m. Profit (C & P) = 83.21% × $51.9m = $43.19m. On a P/E of 10 worth 84.7p. Scenario 7 with coal owned 100% and Power ONLY equity of $116m. Profit = (82.71% x $27.9m) + $24m coal = $47.07m. On a P/E of 10 worth 92.3p. Obviously the high end value is a long term viewpoint but anyway that’s it done fwiw. The profit for the 100% owned case with Kibo retaining 83.21% of the power element, Scenario 7, is still the highest for this case but only just by a factor of 1.2 between Scen 4 (C&P) and Scen 7 (100% coal & a % of power) for this case considering a share value of $1.68. The difference between the highest profit and lowest profit is much less at $7.31m, as is the difference in the share price, which is now dropped to 14.3p. From above, owning 100% of the coal element and a % of the power is more attractive at the lower share price end or valuation of the assets. As the valuation or share price increases, the ratio of highest to lowest reduces from approx. 2.1 to 1.2. So at high values there is less difference between the profits and share valuations across the 4 scenarios. Coal exports could also be a consideration for Kibo, as can the alternative energies of coal to gas which is currently under investigation. Buying EDL would give us another 171mt of the black stuff for selling/exporting without delineating additional resources. So that is an edited version of the previous post showing how the profits vary across the 4 scenarios, for the two share price considerations, i.e high and low. So which way do we go? It may all be down to the values attached to the assets. 1. Do we have a Coal and Power integrated twin tracked project or  2. Do we retain 100% ownership of the coal and sell off the Power SPV assets as required? Comment - Yes a P/E may be inaccurate as we all know but it is at least comparing like for like. So do we use a smaller ratio and if so how safe do we go? Valuation is not an easy task. Re evaluating shares from an NPV viewpoint that also has a shortcoming. Often the problem looking at a valuation of the NAV which includes the NPV and loans is that it is too severe an assessment early on, especially when in our case we know that the loans are not everlasting with short term payback periods involved in both projects, particularly for the coal. I may be wrong but as far as I remember Beaufort’s analysis concluded a share price of 31p and this appeared to be derived from a valuation based on simply dividing the NPV by the shares. I would be targeting up to 30% of the NPV as safe to buy, but then yet again MasterInvestors article discounted this approach and he certainly discounts using the NPV and dividing by the No of shares. Loads to look forward to from now on in. Gil
gilbly: Morning. No internet for over a week, so out of touch with all posts. More thoughts for today on funding and selling etc. All early stage miners go through the process of exploring and delineating a resource followed by a series of consecutive studies such as Scoping, PEA, PFS and DFS and these culminate in a Bankable report which is instrumental in negotiating for finance. Invariably the Bankable study is a necessity as the banks call for this level of reporting and the financial decision will be highly dependent on this. So the financial aspects will be well and truly investigated but first and foremost the project has to be capable of paying off the debt by generating adequate funds over the loan period of the debt, which is likely to be over the life of the power plant. That is the reason, as we know, for all of the financial calculations on the NPV, IRR, ROI and payback period and a whole host of other financial metrics that are considered in the modelling and analysis. In progressing to this stage additional value must surely be attached to the project. On completion of the DFS the transfer of the MCPP assets to a project holding company or SPV will take place and the split will be 85% to 15% in Kibo favour. This separate special purpose vehicle probably ensures for one thing that Kibo and SEPCO are not liable for future debts of the project. Assuming we have a successful DFS/BFS conclusion, the debt funding will be successful if, the equity requirements are satisfied so we are all keen to ascertain the exact route of the equity funding level from here on in. LC indicated in the RNS that he negotiated hard for their share of the holding assets or SPV and it will reflect the original cost of the Rukwa acquisition and all expenditure to-date and would allow for asset disposal as and when required during the progress of the project. I suppose the disposal of assets can be concluded immediately at the outset or progressively as we proceed and need funding. In fact the whole situation re the Power, in particular, may already be done and dusted with an agreement between Kibo and SEPCO III. Who knows? So moving forward with this 85% share of the SPV and with the debt to equity gearing ratio now 75%/25% we are mindful that we have an obligation to raise this equity funding in proportion to the final percentage of assets held in the SPV. It is always an option of course to sell off the whole Mbeya project lock stock and barrel and that would create a substantial value. Any guesses? Perhaps we will own only the coal element or a high percentage of it and SEPCO the Power side or ultimately we may still retain a share in the MCPP. This being the case, to advance the project the equity funding is paramount and there is a high probability that we have to dispose of an asset share to realise this funding. The question is at what price and what percentage of the assets. Once the DFS is completed the project needs the debt and equity funding and the decision to proceed finalised and it is probable within this financial time frame, that SEPCO and/or other partners will come on board and a percentage share of the assets, will be released and we obtain a guarantee that the partnership has the equity raising capabilities. SEPCO is a subsidiary of the huge ChinaPower organisation and it would be no surprise if SEPCO III purchased the whole of MCPP particularly with the potential to increase from 109mt of coal to 400mt. The current resource is sufficient to double the power to 600MW and the potential resource of 400mt, has the capability of supplying 8 phases of 300MW stations. Kibo did not come all this way for nothing so regardless of what eventually transpires they are bound to create value for the shareholders. The question of course is how much. A solution to funding is imperative or the project won’t happen and given the power shortages they have, it is essential for the Tanzania Government that the Mbeya project succeeds. So there is pressure on everyone to finalise all aspects of the project towards financial closure and the likelihood is that the Tanzanian government will be a venture partner. But at what share? LC indicated in the last Mining Weekly interview that he was happy with shareholder role and confidence and some institutional investors were now in. In addition when prompted by the Interviewer about returning to the market he was confident that the shareholders would provide support. We had a handful of partners interested in the project prior to signing with SEPCO III and LC has indicated that parties remain interested in taking a direct investment, so we must still have their attention. If we were to dispose of all of the MCPP asset tomorrow and it was advantageous to ALL shareholders, then would most agree to this? Maybe we should all sort out our voting rights as nominee a/c holders need permission to vote. For the time being however the situation is such that we have a majority asset share, available for disposal at any time and we know we have to raise a proportional amount of equity funding on our asset share. It is clear that the SPV assets will be realised and reduced, but by what percent? Looking at the PFS figures for the coal and power elements we have: COAL PFS A 28 year mine life at 1.48mt of coal per year (42mt per year) Coal revenue $48.4m to $48.6m per year. Cost margins - 49% to 62% (with 25% considered healthy). Annual profit - £24m to $27m. CAPEX - $38m to $73m. (Preferred option is $38m). NPV - $211 to $244 at a 5.5% discount rated. IRR - 33.6% to 53%. ROI - 595% to 903%. Payback period - 2.6 to 3.65 years. Sensitivity - coal price and op. costs. POWER PFS 1,841GWh to 1,877GWh per annum based on an 80% baseload. (From Post 34194, this estimates 2628GWh Max X 80% = 2102.4GWh) Power revenue $7.8 to $8.4 billion over life of PS. NPV - $230m to $280m at a 15% discount rate. CAPEX - $640m to $760m. IRR – in excess of 23%. Payback period – 8 to 9 years. From above the current combined CAPEX is $678 to $833 million. The latest figures are now 75% / 25% debt to equity gearing ratio. So, the debt funding is now $508 to $625 million whilst the equity funding is $169 to $208 million. So with the current asset split of 85% to 15% in Kibo favour, the required equity funding for Kibo will be $144 to $177 million. Regarding the PFS completed on coal and power if we look at the current NPV, this is not a small NPV of some $99.6 million as per Beaufort, but with a coal NPV of ($211m to $244m) and a power NPV of ($230m to $280m) we have an accumulated NPV = $441 to $524 million. As mentioned in last post, I am not sure what sort of credence you can attach to the Beaufort's report. For me there were too many notes not in the same Hymnbook. As Company broker I thought it was appropriate because of the differences in the NPVs and also because of the new RNS on the coal PFS, that they should be releasing another update for clarity apart from anything else. Yes they can still update when new info is issued on Imweru and Haneti, meantime they could be helping to promote the Kibo cause. Note that I attempted to estimate rough worth in terms of price per share and a Target Buying price per share and this varied from 11p to 47p per share as I recall. Assuming of course that all SPV assets belong to Kibo, as no SPV currently exists. As we contemplate the venture, the reality is, we are sitting on top of an 85% share, (which will probably be diluted) of a twin track coal and power project with a coal turnover of $48.5m x 25 years which is $1,212 million or £1,358 million over 28 years. Having mined the coal, we sell it to the power station (our power station) and from the power plant we generate a turnover averaging $8 billion over the 25/28 years LOP. So that’s a combined turnover of approximately a $9.3 billion. In essence this translates to a combined profit of $55.5 million per year. ($24m coal + $31.5m power). However the power is an estimate from Post 34194. As we were only given the turnover of $7.8 to $8.4 billion the estimate assumes we have a profit of 1.5 cents on a 10 cent electricity tariff. i.e. 15%. So for mine production and power generation over 25 years the estimated profit is $1,387 million. In the studies I feel LC has been conservative and instrumental in ensuring that the modelled price of coal was less than the current value so he now has a possible 22% rise in hand and there is scope to increase the electrical tariff although it will be well below the 18 to 35 cents as he indicated in the last interview. Therefore I think the DFS may well throw up revised figures expressing further improvements, particularly if there are likely to be private off-take agreements on the electricity tariffs. The burning question is, how will this funding be realised. Any partner investing directly must have adequate funds so that the partnership can meet the equity funding requirements. A consortium of banks will no doubt supply the debt funding based on positive Bankable studies and on the proviso Kibo and SEPCO III cover the equity funding share, which is now currently at 25%. Under the debt financing arrangement it is possible that repayments will not start to be paid back until the power generation revenue comes on stream . To raise finance, there are ways of issuing bonds and royalty and streaming capital finance options where a share or price of the mineral is agreed upfront in exchange for Capital finance. However LC will be well advised on his finance options regarding the MCPP. Kibo SPV asset share of 85% will reflect the original purchase and costs to-date, of say $27 million. SEPCO will have a $3 million spend on the power DFS. However, regardless of this, Kibo need to raise a share of equity in proportion to their 85% asset share, which is presently $144 million and the easiest way is to sell off some assets, which also reduces the amount of equity funding to be raised. If we sell it all, of course we will have no project, and do not need to raise equity, and can you imagine the substantial revenue we would receive in return? We cannot use the assets to borrow money as these will be held as security for the debt funding over the loan period, which is likely to be the life of the station. Not too sure if there are possibilities of raising finances on the strength of the Imweru and Lubando projects, so we can offer these as security to a lender. The equity funding figures above are too high to raise through a full placing, so obviously we will release some, or if the price is right, all of the assets in the SPV, to any party interested in investing directly in the project. We all want to Kibo to create value and thinking about it logically, why should Kibo not sell off the Power and then concentrate on the Coal. It currently belongs to Kibo. The current coal resource will need $38 million of capital and will generate $24m - $27m as stated, so not a bad return. That way selling off the power element we will probably have working capital for all of the other projects and have a coal profit of $24m per year to anticipate. On a P/E of 6, this is about 28.6p and 25/28 years of profits ahead of us. In addition we do not have to consider selling off any projects. The resource of 109mt is enough to supply 2 x 300MW phases of plant and the remaining coal field has massive potential and it will eventually be defined. This will generate a large revenue when producing. (e.g. The potential - Using the £32.8/t from the PFS an extra 300mt of coal would be worth profits of $9.84 billion and using the 49% margin this is $4.82 billion. But only a potential at the moment). Assuming we remain in MCPP, how do we start to fund the equity? I think LC indicated the intention with Imweru was to use it as a self-funding mechanism for the Lake Victoria gold fields and Haneti. But he may change his mind if we need finances given the potential in profits to be made. However we are not party to the strategy they have and they must have a plan A and a backup plan B in mind. Currently work is progressing on the Imweru PFS and that study itself may be enough for an agreement to be made to sell Imweru. Assuming that we need to. It may also be the reason for running the Imweru PFS in parallel with Mbeya. Unless we have other sources of funding, we can consider selling Imweru or mining it, either independently or through a JV development. 1.SUPPOSE KIBO DECIDE TO SELL IMWERU Although Kibo have 4 other projects, suppose they decide to raise equity funding by selling Imweru at a reasonable price. What is a reasonable price? Selling Imweru may happen, but preferably after they have completed the PFS, which is ongoing, as it should create additional inherent project value. Approximate valuation ‘in the ground’ is about 5.2p per share and upgrading to P & P is possibly worth 19.6p per share, from a previous post. Acacia own a 10% free carry up to mining then have to contribute or be diluted to a 2% smelter royalty and also have first option to buy at the BFS stage, at an agreed market price. In short, I think that Acacia know the resource potential here and that Kibo plan to extend the resource by 40% to 80% as well as increase the confidence levels. Therefore they may well decide to agree on a middle of the road price between 9p to 12 p. In addition any deal done at PFS stage is likely to be cheaper for Acacia than at the Bankable stage. So room for Kibo to manoeuvre for a higher price. Is it worth considering taking Imweru to the BFS stage by spending additional funds which may encourage Acacia /Barrick to purchase the goldfields at a higher price? Acacia know precisely what we have got and will be well aware of the fact that KIBO will be keen to extract a worthwhile price for Imweru and possibly Lubando with MCPP taking centre stage. A Barrick mine is in the area, as you would guess and many of these well-established mining companies are running short of fully explored fields. Exploration is slowing down as the grade quality reduces in the remaining goldfields and now they let the junior miners do the work for them, then step in later. If Imweru is sold, Kibo gain a source of funding for the coal capital outlay and Acacia obtain a resource with great potential and importantly for them, at a price significantly less than if they proceed to BFS. If successful, Kibo have created and obtained value to fund the Coal project and perhaps a contribution to the equity portion, if we are lucky with the price. Selling - Imweru may attract an 'in the ground' valuation of 10p per share, which is worth £32.9 million ($50 million), but hopefully it would be more than this. From above if the equity funding required is ($169m - $208m), with Kibo share ($144m - $177m ) and we utilise the Imweru proceeds of $50m (29.5% of SPV, say 30%), the remaining equity to be found is $94m to $127m. (So $94m is $94/169 = 55% of SPV). Assuming the low figure, the remaining 55% of the SPV assets are available for disposal and any purchasing partner or partners are then responsible for raising the $94 million of equity. So we then proceed to the next phase on the basis of Kibo with 30% and SEPCO III with a 15% share with the remaining 55% of SPV assets to be acquired by partners / SEPCO III. Assumes of course that Kibo cannot raise further cash until any SPV asset is sold and any further retention of SPV assets is then reliant on the revenue realised from a part disposal. Selling Imweru effectively covers the CAPEX for the Coal element of $38m and we can then start to implement the coal mine design and development phase and advance it to production. It must be possible to bring it into production within a year. Then we have the options to sell coal to fund the ongoing power work and to stock coal for the PS as we go. Perhaps later we can export coal or generate revenue from the alternative energy technologies. (Investigation of coal to liquids operation is ongoing and due in Q1 2016). So worst case scenario by selling Imweru and raising $50m we have a 30% minimum share in the MCPP. The combined coal and power profit estimate is $55.5m and 30% is $16.65m or £10.88m. So on a P/E = 6, this is worth 19.8p per share. Just a guess, but a new partner may be the Tanzanian government on 25% share of the SPV and an increased holding by SEPCO to 30%, with Kibo on 30% and a possibly another new partner on 15%. Alternatively SEPCO may take 45% as three partners may be a better than four. Kibo may have potential to retain more but it depends on the returns on assets sold. Looking at the projects that SEPCO III and II and their parent company are involved with, I am sure they will want as large a share of the project as they can possibly acquire. So with Imweru sold off, cheaply, we have $50 million in the bag and we still have 55% of the SPV assets to sell off. Of course when sold it guarantees the equity funding from the purchaser, whether SEPCO or a new partner. I eagerly await to see how it all develops in the forthcoming months and it will be interesting to see what materialises on the SPV asset disposals front. 2. IMWERU WORTH Imweru however is worth far much more if it is advanced to mine production and we realise the 'out of ground' value. There is a 550K oz of gold resources at Imweru and 168K oz at Lubando and they are hoping to increase this by 40% to 80% along with the confidence mineral levels. So 550K oz of gold at $1.2K / oz is $660m and 168K oz at $1.2K / oz is $201 million, which totals $861 million for the current 718K oz resource level, with further potential as mentioned above. Assuming Op. costs of 50% this is $430 million profit between Imweru and Lubando. It is starting to get very interesting now and I can’t help wonder what sort of deal LC is dreaming up? There has to be a surprise package concocted somewhere in the script as the project progresses and the story unfolds. LC has been safe on the coal price, the electric tariff and then on the Debt to Equity funding ratio. So what is next? Perhaps an inexpensive dollar loan from Tanzanian government due to the importance of this project for the Tanzanian economy and people. 3. WHAT IF SEPCO BUY INTO A JOINT VENTURE WITH KIBO IMWERU & LUBANDO What about SEPCO III buying into the Imweru (and Lubando) projects. Rather than sell off Imweru, if SEPCO buy a share of Imweru, then we have additional mining proceeds to add to the equity funding pot. So perhaps this is the reason for the Imweru PFS being worked in parallel with Mbeya. The question here is also what price for a SEPCO share of Imweru? Maybe a price to reflect the acquisition costs of Imweru (and Lubando) and the work costs to date, but this is likely to be too low and has to reflect the project potential value. Assume for the present that we receive sufficient funds on the JV deal to start progressing the Mbeya coal to the production stage. Then they may consider doing two things on Imweru; i) They proceed to mine and simultaneously, ii) Explore and delineate a further extension of the resources in the region of the 40% to 80% they are predicting. Suppose we proceed to mine what would we produce a year? For a life of 6 years and with a gold resource of 550K on Imweru alone, assume the mine produces 92K oz of gold per year. (Probably less the first year). Added later – Checked and expected life is actually 7-10 years. The 92K oz of gold is worth 92K x $1.2K/oz = $110 million and say the profit margin is 50%. This generates $55 Million. So accounting for Acacia’s 10% share this produces a revenue of about $50 million. This is about the same as if we sold off Imweru for 10p per share. However we can still mine for another 5 or so years, at the current production / resource level. So in 6 years we generate 6 x $50m = $300 million, which make a considerable inroads into the equity and debt funding even within the three and half build period for Mbeya. A Mining JV with SEPCO on Imweru is beneficial to both parties and it may allow the coal production to get underway. So in conjunction with SEPCO III, we mine Imweru to create revenue, use this to set up coal production, which can be sold early on to generate funding (for the power) and then eventually supply coal to the PS to generate power. Acacia are involved to the tune of 10% and have to contribute to mining or reduce to 2% and they only have the option to buy at the BFS stage. Now the threat of possibly mining with a new JV partner such as SEPCO, may provide the impetus to pressurise Acacia into opting to purchase Imweru at a more advantageous price to Kibo. But given what is achievable with possible mining in a JV with SEPCO III is it worth selling Imweru for 10p a share? However with SEPCO on the project probably mining is a better option if it can be implemented rapidly as it will generate much more value than 5p or 10p per share by selling and contributes to Mbeya coal. So should we sell Imweru, or if it is possible, commit to a JV with SEPCO III, start the Mbeya coal mine, then proceed to mine Imweru and generate a higher level of profit from the gold resources? Which way will we go and have we the timescales, which may be a deciding factor? Intriguing question, what asset share of the SPV will be sold, what revenue will we have generated and what will our final share of the SPV be assuming it is not 30%. Perhaps as I already said the easy way is to sell off the Power to SEPCO and concentrate solely on the mine, it may be negotiable and easier to arrange before anyone else climbs on board to invest directly. In that way we are remunerated for the value we have been creating to date including financial closure, so we have the funding to return to shareholders, participate in acquisitions and further advance the existing projects down the road to value creation. Tadtech spoke to LC a few years back and LC stated that Kibo strategy was to demonstrate value and then realise that value. Just as MTR appear to be doing, same philosophy but just a different and a more ethical approach. The current values returned from the PFS are considered exceptional according to LC with potential to increase profits apparent, as they used conservative coal pricing and a higher value electricity tariffs looks to be possible, so revised and finalised upward figures should be forthcoming with the DFS reporting. So with the completion of the DFS / BFS and financial closure in Q1 next year, and things are done and dusted, we must surely add value to the Mbeya project. We have something that plenty miners would envy, we just need the acumen and wherewith all to be able to carry it off. The price may not be doing much at the moment but we have plenty to look forward to. Just a thought, LC has indicated that he will create value for the shareholder. Has anyone actually asked him what this value would be? Next news may be the Morogoro assay results, I think they were due in Q3. Possibly an update on the progress and discussions with the Tanzanian authorities on the Power Purchase Agreement the Implementation Agreement and the EIA. The permitting and licencing is expected later on. Also they might issue an update re Imweru PFS, possibly in the October quarterly review. Maybe sold, or a JV after the PFS! Plenty of work to do in the DFS, but with the information they have, they must be looking to classify the mineral resource as a Mineral Reserve and increase the confidence levels of the resource. Thus improving the Bankable study and financial expectations. Haneti – More analysis of the geophysical data may lead to confirmation of the drill targets and expected start dates. This was to be later in 2015 once they complete the geo technical drilling at MCPP as outlined in the 26May 2015 RNS. I think the drilling was to aid the mine design criteria work for later in the MCPP study etc, so we may have these results. Exciting times ahead. GL for this week. Off to Portugal tomorrow for 10 days.
gilbly: Evening, just back from visit to Chicago, Nashville, Memphis and New Orleans. Last few days the weather in NO was the same as here when we landed, wet but at least it was warm and humid. A really enjoyable trip and a shame we did not extend it as a fortnight was just not enough. Slept for 12 hours the last 2 nights. Zzzzzzzz. Still jet lagged here. Q for Andrew1 - Is there a problem with LSE site I can’t access the site at present. Off tomorrow to Tenerife till the 14th November and back home on the 19th Nov. after another nomadic trip to Scotland. Hope we have some good news shortly. Board not to busy these days. Glad to read that politics are sorted with the incumbent party returned. Undoubtedly the best decision for Kibo et al and may have saved them 6 months or so pending the re negotiating with new ministers on applications and permissions and licences etc. Although it is currently not reflected in the share price, shame. So hopefully we will maintain our progress on the DFS and head on towards reporting issuing and the all-important FC. The last RNS would appear to fulfil two tasks in one with the drilling to confirm the slope angles of the pit, which is a pre-requisite for the pit design and the recovered core doubling up to provide metallurgical samples for verification of the coal properties for the Power station design. From the web site previous coal tests stated; “The results of petrographic analyses from three samples submitted to an inspectorate laboratory in South Africa classify the coal as medium rank bituminous D coal. This indicates good economic potential of the coal particularly as feed for coal fired electricity generating plants”. So the tests on the specific properties of these samples should be available in about 4 weeks time. Another step forwards for Kibo. There should be plenty of news to look forward to in the coming weeks and months on MCPP. There will of course be plenty of details to be released in the DFS reports for both Mine and Power elements, some of which are itemised in the key operations plan on the web site. Re the ongoing DFS, the coal purchase agreement and the electricity supply agreement and the EIA are all likely to be well advanced if not finalised by now. Also in the list and due Q4 2015 is the securing of the necessary Permits and Licences and Modelling of the Mine and Power Station. The alternative energy investigation re coal to liquids is due Q1 2016. I thought they would be looking to increase confidence levels of the mineral resources through a re-classification, so we may get a statement to this effect. Also I thought that perhaps they may have looked at some random sampling over the remaining area, which has the potential for expansion to bring us up to about 400mt from the present 109mt resource. No doubt further delineation of the resources will come eventually. We have enough to double the power generation to 600MW with two phases to the power station, which is often normal. They build one phase before proceeding to the next phase, if it is not problematical. The power plant may have some teething problems and may not always perform as planned and if it don’t work you don’t build another one that also doesn’t work but incorporate all of the necessary updates and modifications. So sometimes better to finish one phase before deciding on the next. Also it may fail on the performance acceptance tests and a hefty penalty fee may be applicable based on any below par performance. However they can, especially if there is a need, announce that it is their intentions to build two phases, all going well and this may save on granting of permissions and licences etc at a later date and so this then sets out their stall and prepares a clear path for the design and constructions stages. In reality Phase 2, if there is to be one, should be built quicker than phase 1 as no major design is required. Coal Element. In effect to supply the power station we need a coal resource of 1.48mt/y which is 41.4mt over 28 years and allowing for a reserve of 30%, which the banks may well expect for a coal resource, this equates to 54mt for the station, which is half of the current resources of 109mt. So we can easily double the power generation to 2 X 300MW PS phases without the need for further coal field extension. However it is pertinent that they appear confident that there is excellent potential to expand the resources up to about 400mt of coal. An amount equivalent to supplying 8 phases of 300MW. Re the coal purchase price, this should be more or less decided now. They used a conservative value of $32.8/t in the PFS which is low in comparison to the current price of about $40/t, so for the mine figures, we can expect an increase in the $24 million profits by a possible 22%, or about a fifth. It is a strange concept that we will be digging the coal out of the ground and supplying it and charging it to a power station, which is our power station. It also means we are more or less in control of the prices and may have more stability and so may have less price fluctuations which are bound to exist in the market. Most figures are done on the basis of a fixed level coal value over the life of the plant but there will of course be some movement either way in these prices with scope to manoeuvre. The stated mine profit of $24m is based on conservative estimates, without considering the other half of the current resource of 109mt, let alone the potential to expand the resources. So assuming we raise finances and have a short term loan for the coal mine, we can start early production and sale or export of coal, which will facilitate loan repayment and/or allow part funding to be realised for the equity funding. The quicker we get started the quicker we start to create revenue. Is a year to production realistic? Wish we new what the strategy was going to be re all of the financial issues, but I suppose this will all be revealed in time. The current coal resources are 109mt, if we extract half and sell it off we still have sufficient for the power station and on top of this they believe that potentially we have an extra 300mt of coal resources. This being the case, at $32.8/tonne, this will be worth sales of $9.84 billion and at the predicted cost margins of 48% this will yield coal profits of $4.72 billion over the mine life. (based on the conservative coal price used in the PFS, so this may increase by about 22%). Assuming we produce the same amount of coal for sale as we anticipate is used in the PS, which is 1.48mt/year and we achieve $24m profit per year, this is equivalent to, $24m/328.9m shares, which is 0.073 dollars per share, or 4.77p per share and at a P/E of 10 this is worth 47.7p per share. (Assumes Kibo ownership only, but would be split according to the final asset share held). So assuming we have a buyer for the coal, this provides early profit per year, without the need to supply the power station at this point. Not forgetting we potentially have another three times the current resources. If we owned only the mine element, this produces a fair turnover and profit over 25/28 years based on 42mt of the current 109mt coal resource. (Perhaps we do a deal with SEPCO and we own the mine and they own the Power). The question is how much coal is it practicable to extract each year, as they could double up on the above if it was feasible? Compared with the power it is cheaper to mine the coal with less CAPEX outlay ($38m) and I would be thinking of further delineating the coal field to establish additional resources and concentrate on coal extraction to generate revenue for a couple of years prior to the power plant being built and commissioned. Alternatively Kibo and SEPCO III could buy up EDL and their 171mt of coal resources. So revenue can be generated initially with the early production and sell off of coal and another option is the additional markets which may be available for any coal resources not required for the Power plant generation. i.e. the alternative energy technology of coal to liquid gas conversion energies. This is under examination with the results due Q1 2016 and may be another important factor in reducing the equity funding requirement for the Mbeya project. Indeed the level of profits generated may all depend on how quickly they can remove and process the coal minerals etc. which then might dictate the amount of equity funding we might require. An increase in the profits will of course be reflected in any NPV estimate updates for the mine operation which may be forthcoming. Power Element. No doubt SEPCO III will confirm the final figures for the POWER element when they complete the power DFS. This is likely to be impressive as they will have had time to look at the electricity tariff rates and the possibilities of getting private off-takers on board which is probably at premium tariff rates compared to the domestic tariff rate. Beaufort’s Sheldon Modeland, as far as I remember, indicated that the electricity tariff was price sensitive in his model and varied between 9 and 11 cents per KWh. So hopefully we should see a fair increase in the tariff rates, albeit they are aware they must be competitive but still offer rates that remain affordable to customers. We should not lose sight of the fact that the main reason for the plant is to close the shortfall in power capabilities and supply in the region. Assuming power generation of 300MW, the plant generates a max. of (300,000KW x 24 hrs x 365 days) = 2628GWh. I have previously assumed the power element profit to be based on 15% of the mid tariff of 10 cents/KWh, or 1.5 cents per KWh and the resulting profit is (2628 x 10^6)KWh x 1.5cents = $39.42 millon per year. So at max load, every 1 cent change in electricity tariff will change the profit by $26.28 million and at 80% load a 1 cent change will change the profits by $21 million year. Assuming a base load factor of 80% this is a Power profit of $39.42 x 80% = $31.54 million per year. Combining the coal and power this is $24m + $31.5m = $55.5 million a year. (for 1 phase). Currently this is worth $55.5m/328.9m shares, which is $0.168 or 11.0p per share and based on a P/E of 10, this is worth $1.68 or £1.10 per share. (Assumes Kibo ownership and 1 phase only). Again an increase in the electricity tariffs will increase the NPV estimate, although not proportionally. Tariiff rates and coal prices are important here and we should have some degree of control on both. In the studies they have been conservative and there is scope to increase it, but it will be well below the 18 to 35 cents as LC indicated in one of the interviews. Note that as I recall when EDL did their PFS in March this year they quoted two NPV values. The higher NPV was based on commercial take-off tariff and was about 50% higher. So perhaps scope for Kibo to increase the power revenue with commercial take-off rates at higher electricity tariff charges. This of course may be a deciding factor in allowing domestic rates to be lower and more affordable to the Tanzanian people. The work content of the Power element study must be fairly comprehensive, however SEPCO have been there before and know the score so I would imagine they will be well on the way progressing the power DFS. Each passing week brings the FC that little bit closer. I still think the equity funding is the big question and any assets we sell off, along with the price, will ultimately decide on what share of the SPV assets we finally end up with. I am sure LC has his finger on the pulse re the equity situation and there must be a number of options that are open to them. All will be revealed. Surely if they announce another phase extending the power generation from 300MW to 600MW there must be a touch more interest in the Kibo shares from then on, surely? Hume – It looks as though we shall receive the Hume monies by 2 December, which is just in time for a Xmas bonus. Not ours I presume. On the other project fronts. Imweru. The PEA confirmed potential for initial mine development of 7 to 10 years and possibilities to expand for a further indicative 6 years and they hope to plan and budget for this work. An update on Imweru should be forthcoming and based on the PFS information they have and all of their assumptions on the technical, engineering, operating and economic factors and other related factors, it will be interesting to see whether all or part of the mineral resources can be classed as a Mineral Reserve, along with increasing the confidence levels to 70%/85% level. In addition they are confident of extending the gold resources by 40% to 80%. So in future at Imweru we might possibly move up from 550K oz of gold to between 770K oz and 990K oz and we still have Lubando at 168K oz. So combined, this would possibly take us over the 1 million oz mark for the gold. In July they were hoping to make rapid advance in the FS work. Other FS work also expected included the associated environmental assessments and advanced financial modelling and securing of all related permits and certificates. The initial work was stated as being underway and would be fully implemented once adequate funding has been secured. So from this, not really too sure how far we will have advanced Imweru, especially with MCPP taking priority, so perhaps we will receive a welcome progress update. In the past LC spoke about taking Imweru into early production and the Lake Victoria gold projects effectively being self funding. The Imweru project is an intriguing proposition as it can be mined, solely or jointly, or sold if desired, as and when they decide. Out of the ground gold is worth $660m or a resource value per share of $2 or £1.31. The in-ground valuation at 4% of the gold price, is worth 5.2p per share, however it is conceivable they may possibly get an offer between 9p and 12p per share if selling, particularly if Barrick/Acacia are interested, as they have a 10% free carry in Imweru (and Lubando) up to the decision to mine, when they have to contribute or be reduced to a 2% smelter royalty rate. Acacia also have first refusal to purchase at an agreed market price when we get to the bankable stage of the studies. So perhaps we even have a buyer at the right time and at the right price. If they prove up the resources to P and P, the in ground value is probably worth about 15% of the gold price, at about 19.6p per share. What share price are we currently sat at, a paltry 5p? Re Imweru and MCPP, I muted in a previous post that an option may be to sell off Imweru for, say 10p a share, or mine it with a SEPCO III and raise the same amount of £32.8 m ($50 m). This could start the coal production process and/or start the equity fund raising process on MCPP, and still leave us with 85% of the SPV assets to be released for equity funding. i.e. if necessary, which will probably be the case, unless LC has it otherwise sussed out. Could be the big bang when news comes. The sale and percentages retained was hypothesised in post number 34800, but it was only a guess at what we would have to sell asset wise and what we would be left with, in order to raise the 25% equity funding, or the equity portion according to our share of the SPV assets we finally hold. I think this scenario returned, Kibo retaining 48.3% of the SPV, with others on 51.7% and I guessed that Tanzanian government would take up a 15% share. It may be more who knows? Wouldn’t it be nice if we arranged or received a cheap loan from the Tanzanian government or they guaranteed our financing security! However it would appear from the recent Mbeya RNS that they are possibly looking to take on board a commercial loan which is understandable given the robustness of the profit figures. This of course may well change. It may be they can raise finance using the gold fields as security, especially if they can complete the relevant FS. The mine and power plant will be held as security for the debt funding which we will require from the banks and of course this will only be arranged and available to us if we can raise the 25% equity funding. Maybe it is important to get the coal up and running then get it extracted and sold or otherwise converted to alternative energies for sale. Other options might see them raising finance, through issuing bonds or royalty and streaming capital finance options where a share or price of the mineral is agreed upfront in exchange for Capital finance. However LC will be well advised on his finance options regarding the MCPP, that’s what the Standard Bank is there for. A placing might be used to raise a small amount, if required, but not for the equity funding as the amount is too large. Perhaps the royalty and streaming option could be applied to Imweru where a share of the gold, or an agreed price for the gold is set up in exchange for capital finance and this allows us to proceed and mine Imweru and generate funding for the coal and power project. I don’t know enough about this, so perhaps the cheaper option is to arrange finances based on the gold field securities, if this is feasible and implement mine production of the goldfield. Money is then available for the coal mine. Oh to be a fly on the wall in Kibo offices! A few questions still spring to mind. What will the SPV valuation be on completion of the DFS /BFS and the eventual FC? Raising 25% equity ensures the arrangement for the 75% debt funding, but what percentage of the SPV assets will we have to sell and what % will we be left with? What will the final power generation be for the complete project, if we are currently on 300MW Do we get a bank loan and start coal production which will later contribute to the equity funding or De we do as previous and explore further to extend the resources up from the 109mt or Do we get a loan and start digging for Imweru gold then start coal production etc or Do we mine Imweru as a JV, say with SEPCO to fund coal start etc or Do we sell Imweru off before or after further FS work, and can then start the coal mine etc. Do we JV on Haneti and would it raise enough capital? Probably not at this stage. Do we sell the Power element to SEPCO if they want it and run with the Mine element? Do we sell the complete MCPP Coal and Power elements if the price is right and concentrate on the other projects / acquistions. There must be other options of course. Haneti - As far as I remember, as they had firmed up on the drill targets they were hoping to implement their drilling programme in 2015 after the geotechnical drilling was completed at Rukwa, which is now the case. So perhaps an update on this position or word of a potential JV partner. Morogoro - The analysis of the Morogoro samples collected previously must be due soon and this may lead to additional sampling to enhance findings, to extend the mineralisation and assessment and mapping of the unexplored ground. Overall objective is to assess prospectivity and to define the project pathway. Pinewood – As far as I remember a review and update of the historic technical reports prepared for the Pinewood and the surrounding Uranium licence is being undertaken to further refine and define the next exploration studies. No Kibo expenditure is required on Morogoro and Pinewood with MTR committed to their $800K spend in 3 years. So let’s hope MTR deliver in full and play ball with our shares and don’t sell too rapidly. I received a warning once selling a company’s share, as I apparently sold two batches too quickly and was told it may as a consequence drive the price down and they threatened to cancel my deals. Me drive the price down and what do the MM get away with? Things must surely be starting to appear brighter even for the LTH as we are so much further down the road now and approaching DFS completion and then FC, although you would never know this from the share price. However it is easy to say this and I know how hard it is to be holding a share and to retain it when it constantly drops down month after month. LC has said he will create value for the company and shareholders, particularly long term holders. Let’s hope he fulfils this objective for all the small investors in Kibo. Hope to keep reading the posts on holiday in Teno, see you in 2 weeks or so. GLA.
tadtech: It is clear Louis Coetzee is very frustrated with the market value of the company and rightly so. The MCPP is a world class project and has a NPV of circa $500m verses Kibo's current market value of only $21m. It is worth remembering the valuation model put on the project by Hume who offered a target price north of 30p, which at the time some considered conservative. I think the Kibo share price has been immensely damaged by the uncertainty concerning the Hume cash and delivery of those 20m shares. It looks like this has now been resolved. As we all know it does not take much demand to move the share price so I suspect now is a pretty good time to add/buy (in my view) as Louis Coetzee still seems very comfortable in that interview and he hinted of more news flow. As I said previously December is usually a good month for Kibo shareholders. DYOR etc
mrkeysersoze: So what exactly is the problem with the bloody Administrators?? "As announced on previous updates to shareholders, the Joint Special Administrators has confirmed to Kibo that all of the GBP526,000 (representing the consideration for 10,520,000 shares which were to be issued to third party investors) that had been paid into Hume Capital's client money account, will be released to Kibo, less a small proportion representing costs of the administration, which can now be confirmed to be in the range of GBP5,000 to GBP7,000. The Joint Special Administrators have also confirmed that no further delays / postponements are expected with regard to payment of the GBP526,000. " Kibo have sourced alternative funding (at significant cost) just grow a pair Louis & cancel the 10m shares as per the companies articles of association. LC's most recent interview only a couple of days ago highlighted his disbelief with Kibo's current mcap given the significant progress gained with Mbeya. Cancelling the 10m shares would screw over any shorters that have a stranglehold on the Kibo share price & close their exit route, therefore causing a short squeeze. Mr K.
gilbly: Thoughts for today, a nice and steady rise every day would be good. Ah, I wish we could be like this every day, with just enough to keep your interest buds fully activated, knowing fully well that in reality it does not really matter at the end of the day what price we are at in the short term, as you know fully well that eventually Kibo will prevail going forward, based not on guesswork, but from the knowledge amassed and produced to-date on both the PFS reports for the Mine and Power twin track elements. This in turn leads us to the completion of the DFS and a Bankable FS report and then it’s down to the nitty and gritty phase of financial closure with disclosure of the funding sources for debt and equity. So if anybody has any doubts they should read up a little and then make their mind up and honestly appraise or criticise the Kibo investment situation then decide if this investment is beneficial. I’m sure most of us would prefer to hear the pro’s and cons about a particular investment situation and perhaps we might be more aware of a company’s position and shortcomings. Perhaps one of the problems is that there are not enough analysts out there that have the resources and honest enough opinions to look at the vast array of companies out there, review and analyse a company’s share and then inform us on exactly what they think and feel about a particular investment. This is despite the fact that we the PI are the first to go over the top and sink our well-earned dosh into many investments and pave the way for the institutions to eventually arrive and soak up easy shares from many early investors who had become demoralised, bored and frustrated with a company’s share price performance. Regarding a possible mining investment, invariably people will always advocate, yes it is speculative, but after all Kibo is only an early exploration (and development) company with only the potential to mine and so the resource remains in the ground until you start producing and making a profit. They will also inform you that there are umpteen companies on AIM in a similar sort of situation, with the same sort of aspirations and the same sort of investors with the usual and normal mind set, as far as we the investors go. We are only human and we do what we feel is best regarding a share with potential, as often there is no one to advise and show us the way. Institutions pay heavily for investment analysts to guide them through the maze of companies and investment opportunities and they appear not to care too much about the ethics of investing as long as they profit in it, long or short. In part some of the foregoing may be true but there are steps in the cycle of events that add value to a company and some of these steps especially for a miner/explorer entails the preparation of a requisite amount of studies which allows them to move forward a step at a time creating a small piece of value each time as they go. In theory this is paper value as it is not being produced, nevertheless it is ‘value added’ work, or effectively it should be, and once produced they know that they have completed a small chunk of worthwhile effort that has created value, albeit "on paper” which may never need to be revisited or re-vised again, if they are lucky. In looking at potential companies to invest in we can all, as best we can, research a company and look at the fundamentals in question and no doubt some will be able to do it better and more thorough than others, we are all different. However it gives me some sort of satisfaction, that having done the homework, duly invested and satisfied with progress of the investment so far, to hear a the Mining Maven broadcast where the CEO, LC indicates that: a) the CRITICAL PART of the work has been completed producing the PFS reports for both Mine and Power elements. b) he too is UNHAPPY with the share price and is FRUSTRATED at the level of the share price despite the fact that they have indeed created value to the project over the last few years. This just illustrates how far we have actually come in a fairly short space of time and it is not often you hear a CEO voicing these words, as invariably it is along the line of; we have no control over the share price in the market. It also interesting that we the investors are not the only ones frustrated with the performance of the share price following the positive news releases issued and that our expectations were in fact justified according to LC's commentary. So we are further de-risked and if I was new to this share, yes I am sure I would still do my own research, however on the strength of his comments, I think I would be prepared to invest purely on the basis of what LC thinks and feels about the present share price value given that he has much more working knowledge of the company and its projects than I do. The other four projects will continue to be worked in parallel albeit slower progress and we will hopefully get news on these between now and financial closure of MCPP. There will be some who invested here more recently who have done their research and concluded that they are satisfied with the fundamentals and it is well worth investing in Kibo and maintaining an investment that means something. On the other hand there will be some long term holders who also thought the same a while back and have been subjected to a long period of share placing's and a constant share price dilution, so perhaps Kibo have a lot to answer for in this regard. Hopefully in the coming months, as it appears, it will be payback time for Kibo and that they will develop and create shareholder value and all shareholders, including the long term holders of this share, will be rewarded in due course. (and notice I never said 'shortly'). I think that solid support from the BOD with news of a fairly substantial investment would go a long way in providing a much needed boost to the share price and would be a tremendous vote of confidence to all of the small investors here. The news may even be eagerly awaited by the institutions although they are more likely to be awaiting details of the Financial Closure outcome.
gilbly: Morning. MAB - Not too sure if we will see much action re buying back shares. My thoughts are inclined towards the intrigue as to how we fund the Equity share. The 75% debt funding will not be a problem providing we can raise the 25% equity funding and the chances are that the debt funding will now be well advanced. In the 12/10/2015 RNS they have just firmed up the previously released figures so they now know the Coal finals are more or less as now stated and essentially for the preferred option and low end of the previous figure range. Interesting that in the RNS they referred to the debt to equity gearing ratio of 70%/30%, although they do anticipate that the MCPP will be an integrated project as we would expect. The figures for both COAL (with the RNS updates) and POWER elements are: COAL PFS (----- Now more or less firmed up with the latest RNS) - A 28 year mine life at 1.48mt of coal per year (42mt per year). - Coal revenue $48.4m to $48.6m per year. (---- Now firmed up at $48.4 million ). - Cost margins - 49% to 62%, with 25% considered healthy. (------- Now 47.9% to 48.1%). - Annual profit - £24m to $27m. (------- EBIT now $23.5 to 23.6 million). - CAPEX - $38m to $73m, preferred option is $38m. (--- Peak funding confirmed at $37.905 million). - NPV - $211 to $244 at a 5.5% discount rated. (----- Now $214 to $219 million based on 5.51% DR). - IRR - 33.6% to 53%. (---- Project IRR now 54%). - ROI - 595% to 903%. (------ Cash return on capital is now 726% to 732%). - Payback period - 2.6 to 3.65 years. (----- Now 2.6 years). - Sensitivity - coal price and op. costs. POWER PFS. - 1,841GWh to 1,877GWh per annum based on an 80% baseload. (From Post 34194, this estimates 2628GWh Max X 80% = 2102.4GWh) - Power revenue $7.8 to $8.4 billion over life of PS. - NPV - $230m to $280m at a 15% discount rate. - CAPEX - $640m to $760m. - IRR in excess of 23%. - Payback period 8 to 9 years. Also of particular interest in the RNS was the statement: “The IRR being substantially above the cost of debt makes it an attractive option to consider project level loan financing. The project's robust financials will play in Kibo's favour in respect of the competitiveness and conditions attached to any such loans” Does this constitute the ability to organise a loan and allow the Coal early production to get underway? Question - So is this going to be stand alone? It states an integrated project so it must still be part of the MCPP. Kibo get recognition for the Rukwa acquisition and costs so it must have always been intended to be a twin project from the outset. As the new EBIT is more or less unchanged from the figure below I presume the coal price used is still a conservative one and we have scope to increase profits by about 22%. From above with confirmation of the COAL figures in the RNS, we can conclude that the combined coal and Power CAPEX is $38m plus ($640m to $760m) which is now $678 to $798 million. Although they list 70%/30%, they appeared to be confident of the last figures which were 75% / 25% for the debt to equity gearing ratio. So on this basis, the debt funding is now $508 to $599 million whilst the equity funding is $169 to $199 million. So with the current asset split of 85% to 15% in Kibo favour, the required equity funding for Kibo will be $144 to $170 million. Regarding the PFS completed on coal and power if we look at the current NPV, this is not a small NPV of some $99.6 million as per Beaufort Securities report, but with a Coal NPV of ($214m to $219m) and a Power NPV of ($230m to $280m) we have an accumulated NPV = $444 to $499 million. This was previously a combined NPV of $441 to $524 million. So the only real change is we have firmed up at the low end for the coal. Confirmation of the final figures for the POWER element will no doubt be issued when SEPCO complete the power DFS. This is likely to be impressive as they have time to look at the electricity tariff rates and the possibilities of getting private off-takers on board and probably at premium tariff rates. Part of the DFS consists of increasing the confidence levels of the mineral coal resources to aid the Bankable process. Also future delineation of a more extensive coal field is deemed possible, where we increase from the 109mt level to a possible 400mt or so coal level. So this will no doubt increase the eventual NPV for any extended resources for the coal element. So on top of the current resource at $32.8/tonne, the potential extra 300mt of coal is worth $9.84 billion and at a 48% cost margin will yield profits of $4.72 billion over the mine life. (based on the conservative coal price used in the PFS, so this may increase by about 22%). This increased coal resource of course may be sold off with early production and stocked up well before the power comes on stream thus reducing the amount of debt/equity funding required. So coal sales and export and alternative coal to liquid energies may be an important factor to increasing the revenue possibilities at Mbeya. In last post 34516, I assumed that MCPP is not sold lock stock and barrel and we have to sell off a portion of our 85% share of the SPV assets once this has been established after DFS completion. A loan to get the coal production may also be a possibility and is more or less indicated in the latest 12/10/2015 RNS and would allow the coal mine to proceed to production. In any event, it would still leave a substantial equity funding requirement. If we receive a project loan it will reduce the equity requirements, however unless we are blessed with a saviour who will fund us the equity share very cheaply, it is likely we will need to sell off some assets along the way. On this basis I have considered that we either sell Imweru for $50 million or raise a similar amount through a JV with SEPCO III, combined with gold mine production. This figure is equivalent to approx. 30% of the equity required, assuming the project requires $169 million of equity to be guaranteed to satisfy the banks in order for the 75% of the debt funding to be arranged. I envisaged that this 30% would be a minimum share retained by Kibo and an increase in the SPV guaranteed share would occur by Kibo selling off some SPV assets and creating funds to allow Kibo to guarantee equity in line with the amount sold. In trying to get a fix on the equity raising obviously this could be miles out as the options open to Kibo will be well beyond our comprehension, because of what is at stake here. This sample calc. was just about trying to ascertain what assets we have to sell to move forward fully funded on the equity side such that the debt funding is a certainty, which it will be if we raise the requisite equity funding. Obviously the results will change according to the assumptions used and this is only one stab at it. So the figures below are a set of figures based on the premise that a realistic selling price for Imweru is 10p a share for the ‘in-groundR17; value which raises £32.8 million or $50 million. The alternative is to raise the initial funds through a mining JV with SEPCO III, which I have assumed would also raise a similar amount with purchase and commencement of mining, with additional funding to come from future mine production. (as set out previously in 34516 on ADVFN). So Kibo may decide to sell or alternatively mine Imweru and it may possibly benefit to the tune of $50 million through such a transaction. This covers $50m/$169.5m = 29.5% or say 30% of the SPV equity share required, with 55% of SPV assets available to sell. This would allow an early start to be made in the coal plant development and production which requires a Capex of $38 million. For the Coal, the Kibo share would be 85% of this which is approximately $32.3m and the equity required is about $8 million for the coal alone. So this proposed sell or mining also provides a start to raising the equity for the power plant. A loan of this size could surely be arranged on the basis that the other projects can be held as security, but I am not aware of what is possible in this case and whether they can use the other projects as security? So let’s assume for the MCPP project overall we have a need for the 25% of equity funding to be raised and we have to sell off some assets either in one go or progressively as mentioned. So just suppose we sell off in stages as listed below: Asset sell 1 - Using a figure half of the previous aforementioned rate of $50million reps 30% of the SPV. With 55% available to sell, suppose that Kibo sell 15% of their SPV assets for $12.5m, it is enough for Kibo to cover 7.5% of the equity they need to guarantee, so in addition to the funding they raise through selling or mining (30%), they now have funding to cover 30% + 7.5% = 37.5% of the equity share to be raised, with 55% - (15%+7.5%) = 32.5% of the SPV assets available to sell. Asset sell 2 - Kibo then go on to sell another 15% of the SPV for $12.5m, and so Kibo can then cover another 7.5% of the equity, so Kibo can now raise 37.5% + 7.5% = 45% of the equity, with 32.5% - (15%+7.5%) = 10% of SPV assets still to sell. Asset sell 3 - If Kibo finally sell 6.67% of the SPV assets for $5.55m, Kibo can cover another 3.33% of the equity they need to guarantee, so they can now raise 45% + 3.33% = 48.33% of the equity, with all SPV assets now allocated and accounted for. So based on the above, Kibo have 48.33%, others have (15%+15%+6.67%) = 36.67% share and SEPCO have 15%. Of course SEPCO may purchase and increase their holding as the SPV assets are released for investment. Indeed SEPCO may have first refusal as they are potentially a 15% holding partner at the SPV set up stage and may in fact take all of the 36.67% that Kibo sell and in so doing raise their share to 51.67% of the project. However it is likely that the Tanzanian government will want a percentage of the project, say 15% (or higher) so Kibo may still end up with the greatest slice of 48.33%, with SEPCO on 36.67%. So assuming the figures are ok, that is a rough example based on selling the assets at half of the price rating we might possibly obtain from selling or mining Imweru as per post 34516. (i.e. $50m reps 30%, so $25m reps 30%. Also in the above we have to guarantee the equity at the rate of $50m reps 30%. So the starting point for the above scenario is based on a guesstimate as indicated above by selling Imweru or mining thru a JV with SEPCO. It is not a prediction just a scenario if we require funding and we have to sell some assets on the way. It all depends on whether we can in the first instance borrow to commence coal production and if and when we have to sell SPV assets, what we can sell them for. It's all starting to get exciting now. Having just got back from Portugal and a christening in Scotland, we are off tomorrow to do Chicago, Nashville, Memphis and New Orleans. GLA in the next few weeks.
gilbly: Hey MAB, I just got back from Tenerife which was hot and also spent a couple of days in Edinburgh. Had a very frustrating time with the internet in Teno. Been catching up on the posts. Just my thoughts and comments on Mbeya and Imweru etc. I think it is highly unlikely that they will sell Mbeya as a whole unless they receive a massive offer and /or the resources at Haneti are worth multiples of the value of the combined Coal and Power project and additional coal resources. So the latter being the case a lot of exploratory work needs to be done in that respect to prove the multiple resources which appear to exist at Haneti. They certainly sound encouraging re the geochemical at Haneti, which indicates the nickel sulphide potential and the acquired geophysical scan which has already enhanced their understanding on the prospectivity of the project. However the timescales are such that they are likely to be homing in on the completion of the DFS on MCPP with financial closure rapidly approaching and therefore any proposed drilling may just possibly be starting on Haneti later this year, so I would assume that no massive resources would be explored and defined by Oct/Nov 2015 at Haneti. If there was then I would see a case for selling MCPP although I might not agree on selling. MCPP is the company flagship at this present moment in time and any selling price would have to be irresistible to LC. I'm sure all of the bidders in the JV process will have been made well aware of the potential coal resources that Kibo have. It is no secret that they currently have enough resources to double the MW of the output power. I always thought it was only a matter of time before Kibo bought EDL with their 171mt coal resource but they don't need to especially if they have 4 times the current 109mt which I think has been implied. Looking at the past RNSs, Kibo appear to have a resource pit with a strike length of 9,050m by 490m wide by 100m deep with a remaining field length of about 35km. (9 Sep 2014 RNS). So perhaps they are well aware of the potential they have. Remember they have enough current resources to operate twice the planned 300 MW for about 40 years and that’s a lot of coal and just think of the worth in coal and the worth from a power generation viewpoint. An early start to production can help contribute towards the Power element funding. Alternatively the additional coal resources may be utilised for alternative energy technologies such as coal to liquids, so more value to be created for Kibo if they go down this path. On the question of MCPP worth they have stated the following in their RNS news items. Mbeya COAL (DMFS Phase1 Stage1). - With a LOM of 27 years and annual production of 1.48mt of coal, the NPV at a discount of 5.7% is $116 to $141 million USD depending on the option. Mbeya POWER PFS. - With a LOM of 25 years and 4 CFB cases assessed, the NPV is $230 to $280 million USD at a discount rate of 15%. Note higher discount values are more conservative and they may include a higher risk factor in the calc. So the total NPV for Mbeya COAL and Mbeya POWER is between $346 to $421 million USD depending on the option they go for. Imweru Project. – Imweru’s 550K oz ‘out of ground’ gold resource is worth about $660 million or possibly only worth about 5p per share ‘in the ground’ value without any upgrading. So it shows us how undervalued we are. If we sold Imweru tomorrow at 5p/share this is worth more than the current share price and this can be used to capitalise the coal mine. The original purchase cost of the Coal asset alone was about 6p per share. Assuming we proceed to gold mine production, my own estimate of the Gold resource over a period 10 years yields an NPV of $73.6 million USD using a discount rate of 10%, and an NPV of $90 million USD at a discount rate of 8%. This excludes Lubando’s 168K gold resource which is also 90% owned. However these would need funding to bring to production. (See post 28081 & 28142 for figures for the NPV with a potential increase of resources by 40% and 80% which may be investigated with further exploration as per 10 Feb 2015 RNS). Therefore the total NPV for COAL, POWER and with IMWERU included is between $419 and about $500 million USD. Currently the market capital of £14.36 million, or $22 million USD is only between 5.25% and 4.4% of these NPV values. Worth considerably more than 25p a share I would think. We also have Haneti, Pinewood and Morogoro projects to be explored and with all of the projects alive and active on all 5 fronts there has to be news to arrive on all of these fronts shortly. No Kibo expenditure is required for Morogoro and Pinewood and we are well funded after the last placing, with still £524K to come via the Hume debacle. The MCPP I am sure will take care of itself through either a) the planned natural development process progressing to the JV conclusion with the manufacturing and operating of the PS or b) by a really transformational offer for Mbeya which cannot be refused, whether it is from SEPCO III or other parties. I would imagine the former will have first right of refusal if Kibo are to dispose of their Mbeya share. Either way there has to be great potential for the share price compared with the current level regardless of what road we go down.. The SEPCO III team who has impressed LC to-date are contributing $3 million to the DFS and will no doubt be competent and meet the October 2015 target date with ease which then points us to the financial closure stages, which should be really exciting. We also have to remember we paid $20 million for the original Coal acquisition and with successful completion of the DFS, the MCPP Power and Coal assets will be transferred to a Special Purpose Vehicle (SPV) to thus reflect the original Kibo acquisition cost and costs to-date. In other words Kibo have an 85% share and SEPCO III have the remaining 15%. This equity can be released to provide funding for project contribution such that, if desired, Kibo may self-finance the project to the extent deemed necessary. A great position to be in as they can realise equity for funding and still retain as large a stake as they can which may still provide a healthy return for shareholders. With this in mind I have a strong pull towards mining Imweru in order to keep the MCPP stake as high as possible, but we still require funding to do this. There are a few options open to LC and will they mine Imweru or sell? Remember as it stands for Imweru’s 550K oz gold resource, that the ‘in-groundR17; value per share is about 5p, (which is about 4% of the gold price) to which we should include Lubando’s 168K oz resource. I think they are going to extend and upgrade the Imweru resources and that way they are in a position to either sell at a reasonable price given the grade situation or mine as they deem necessary and use the proceeds to explore and develop Haneti and possibly contribute towards the Mbeya project and thus protect some of their equity stake. It may depend entirely on what they are offered if someone really wants to buy it and if they can raise funding. Either way we should create value selling or mining. I think they will prove up the resources first as it will be worth significantly more. They have already said they hope to increase the confidence levels and increase the resources by 40% to 80%. (RNS 10 Feb 2015). If Imweru is both upgraded and the resource extended, if they then decide to sell they will receive not only a higher price per oz for the quality of the gold but also a higher price for an increased quantity of gold resources. Increasing 550K oz of gold by 40% to 80% is not insignificant and say we double the resources then we double the ‘in-groundR17; value, without even considering any upgrading. I keep forgetting that Barrick / Acacia have a 10% carried interest in Imweru and Lubando and have to contribute once a decision has been made to mine and if they don’t they are subject to a dilution to a 2% smelter royalty. However they also have first option to purchase the Kibo 90% at an agreed market price when at the BFS stage. (So we have a potential buyer once we are at BFS, if the price is right). If they are going to sell the gold sites it is sensible to spend monies to extend and upgrade the resources to the BFS as they will be able to command a significantly higher price per oz for the gold if it is to be subsequently sold. A Proven and Probably resource (about 15% of the gold price) should command a resource value per share of about 19p, (excluding Lubando). If sold as per current grading, it is conceivable they may obtain 9p to 12p as Kibo and any buyer are sure to be aware of the potential resources. Currently we are sat with a share price just 4.5p. However we are of course another month closer to the DFS October end date and leading point towards financial closure. Anyway I am sure we will receive an abundance of exciting news shortly. GLA
tr4der1: Kibo share price is being manipulated at the moment. But this will stop at point and price re rated to reflect true value 100mil cap at least, thats just for the mbeya (rukwa) project only.
gilbly: Divmad - The share price is better than it was. However the frustration of the level of the share price is often hard to understand other than we are now entering the advanced studies stage and things have a tendency to go quiet, which is a known fact in the run up to the real big issue of completion of DFS/BFS and financial closure. LC in his last interview indicated we are past the critical part of the working studies, which in itself is so important and he also stated how frustrated and unhappy he was with level of the share price despite the progress and value created over the last year or so. In the normal cycle of events in the early days of exploration there is high risk and corresponding low value in the share price. As we start to undertake the various studies, such as scoping studies, PEA, PFS, FS and DFS/BFS, in theory we should not only continue to ascertain if the project is feasible but increase the confidence levels for this and the resulting good news should be accompanied by a reasonable rise in share price. This still has not been achieved regardless of the news issued on the PFS for both mine and power which has produced some exceptional figures according to LC. Successful completion of the studies and adding further to the knowledge base means we continue to de-risk the project such that, in theory the risk decreases and the share price increases, in theory that is. However even though we advance from stage to stage, one leading to the other in a logical fashion, there is no certainty that the projects will go ahead. It is only when ALL events are finalised, permits, licences, agreement, environmental issues and the necessary finance is approved that a decision can in reality be made. Probably only then when we have financial closure is the share price most likely to move upwards. However other events such as an institution climbing on board or directors buying is likely to propel the price upwards at any moment, not to mention the effect on the price if any new party or parties are interested in investing in the coal to power venture. However for those that have the patience to hang on and hold or accumulate and wait until news of the financial closure, (which indicates that we are moving towards a workable project and that we have the requisite funding arranged to do so), should be well rewarded with a most welcome break out in the share price.

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