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
  +0.25p +4.00% 6.50p 6.25p 6.75p 6.875p 6.25p 6.25p 600,813.00 14:27:52
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Mining 0.0 0.2 0.1 65.0 23.11

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10/12/2016
08:20
Kibo Mining Daily Update: Kibo Mining is listed in the Mining sector of the London Stock Exchange with ticker KIBO. The last closing price for Kibo Mining was 6.25p.
Kibo Mining has a 4 week average price of 7.04p and a 12 week average price of 7.70p.
The 1 year high share price is 10.25p while the 1 year low share price is currently 2.75p.
There are currently 355,603,745 shares in issue and the average daily traded volume is 1,729,937 shares. The market capitalisation of Kibo Mining is £23,114,243.43.
12/10/2016
13:51
paleje: This was the article, just found the link again:- Kibo Mining – Why the punters have got it all wrong By John Cornford 11 October 2016 6 mins. to read Kibo Mining – Why the punters have got it all wrong The key misconception behind the chat board ‘projections’ for Kibo MIning is a failure to understand the disconnect between a ‘project’; and the company ‘owning’ it. But this also stems from a failure to understand the concept of a project’s net present value (NPV). These commentators (and even the house broker’s headline – before hiding the caveats in the small print) have suggested a target value for Kibo’s shares based on MCPP’s NPV divided by current shares in issue. Or alternatively that MCPP can be ‘sold’ for its NPV. The former is nonsense because it ignores the fact that MCPP will have no value until the funds are raised – when current shares will suffer the dilution to project value caused by loan interest and by the substantial extra equity (whether in Kibo Mining (LON:KIBO) itself, or in the MDC, or in the MCPP) which will detract from its own share. That the second notion is nonsense can be seen from the formula for NPV – which is Long Term Profit (P) less cost to build (C). This is a crude approximation because in practice the timescale for uneven costs and profits is taken care of by discounting the cash flows year by year. But to simplify one can use NPV=P-C If someone were to ‘buy’ the project for its NPV he would still have to meet the capex to build. In which case he ends up with its NPV (P-C). In return for his purchase cost (P-C + C), he ends up with C, which he has had to pay out. Result: no profit – so no point in buying, and no scope for the owner to sell. (That does not mean that a partner can’t be brought in. But he would have to meet his share of the capex in return for a share of the profit.) An unfunded project might be saleable if it is exceptionally profitable, in which case a buyer could make his own profit from the margin between its profits and the cost of funding. Then, he could pay something (but still not the full NPV) to buy it and still make some profit. But for coal-to-power projects there is only a limited margin between profit and the cost of funding. Profitability is limited by the host government (who calls the shots through licensing so as to pay as little as possible for the power) to a level just enough to attract the international lenders and investors to provide the funds. At present that limit equates to an IRR of around 21%, so that any buyer for such a project would have no scope to make a profit on any margin between its IRR and the cost of funding, which will be the same for him as for anyone else. As already mentioned, what does have a value that could be sold, is work that has been done on the project, in Kibo’s case by the MDC which has spent on planning and gaining approvals and prospective partners to build and finance the MCPP. Having withdrawn its original promise to help funding, Kibo’s prospective partner, China’s Sepco III (not the same as Ncondezi Energy‘s (LON:NCCL) partner who is an operator as well as a builder), has agreed to pay Kibo half what MDC has spent in return for having first go at tendering for the construction. Paying the owners’ planning costs is normal in the industry because otherwise a contractor has to meet those costs itself before bidding. At present, some keyboard warriors are ‘hoping’ that this ‘back cost’ will be substantial (up to $20m, which is about half Kibo’s market cap so would be a useful chunk of cash). But that is pure speculation, whereas Kibo’s accounts show clearly that by now it will likely have spent only some £5m (over and above the original purchase of the coal mine, for which there is no logical reason for Sepco to pay anything) plus whatever has been spent by some advisors who have deferred their fees in the face of Kibo’s lack of funds to pay them. Sepco has so far paid $1.8m of these ‘back costs’, with the rest to be agreed in the coming week and it is hope for a substantial payment that appears to be buoying the shares. My expectation is for a payment of little more than needed to pay the deferred consultants, as well as to plug the £1.5m hole in Kibo’s balance sheet revealed in its latest interim results (apparently unnoticed by anyone). I therefore expect the shares to fall on the announcement. That fall will come after another of the chat board hopes for value crystalisartion was dashed on 23rd September through the announcement of the hiving off of Kibo’s only project with any solid value, its Imweru gold resource in Tanzania’s Lake Victoria Goldfield. Chat board estimates (taking no account of the cost to develop) ‘projectedR17; that resource to be ‘worth’ around 5p per Kibo share – the same as the then share price. But Imweru is now being hived off into a new company ‘Katoro Gold Mining’ which is planned to list on AIM to raise the first tranche of the necessary funds to establish a more solid resource and economic study, before further funds to develop any mine will be able to be raised. While Kibo will have 60% of the shares, their value will be diluted by the £1.2m (minimum) cash raise, and my estimate is that its holding will be ‘worth’ no more than 1p per current Kibo share. As a paper value and unless it manages to sell its holding, it won’t provide the cash Kibo needs to progress any of its other projects. Although Kibo says Katoro will eventually ‘deliver substantial value’ for shareholders, that will only be after raising development funds which will further dilute any value to them. That leaves MCPP as the only real value in Kibo – likely to be no more than my estimated 15p per share in issue – but only in three years’ time when the project is built and running – although that value per share might be anticipated in the market at financial close (when debt providers, contractors, the Tanzania authorities, and equity investors, have all signed up). This has been continually delayed since Kibo first promised, in late 2014, that it would be achieved H1 2015. Now, given that Kibo has yet to sign up anyone to provide the funds, or to build and operate the plant; has yet to agree a power tariff with Tanzania’s electric power co; and has yet to obtain a mining licence (whereas Ncondezi has all those things in place yet is still not expecting financial close before H2 2017), none of the facts to properly value Kibo’s shares look like being available before mid 2017 at the earliest. Even when the bankable feasibility study is published, it will only be one component of financial close. At a later date I will explain why Ncondezi Energy looks the better value. Edenville Energy (LON:EDL), though a long way behind in its own coal to power project, seems in a position to sell its surplus coal earlier, which is why its shares have perked up. But, buoyed as they are by misconceptions, Kibo shares look vulnerable, although investors’ excitement as they await the BFS, irrelevant though it will be to a valuation, might keep them afloat for a bit longer. Kibo Mining – Why the punters have got it all wrong By John Cornford 11 October 2016 6 mins. to read Kibo Mining – Why the punters have got it all wrong The key misconception behind the chat board ‘projections’ for Kibo MIning is a failure to understand the disconnect between a ‘project’; and the company ‘owning’ it. But this also stems from a failure to understand the concept of a project’s net present value (NPV). These commentators (and even the house broker’s headline – before hiding the caveats in the small print) have suggested a target value for Kibo’s shares based on MCPP’s NPV divided by current shares in issue. Or alternatively that MCPP can be ‘sold’ for its NPV. The former is nonsense because it ignores the fact that MCPP will have no value until the funds are raised – when current shares will suffer the dilution to project value caused by loan interest and by the substantial extra equity (whether in Kibo Mining (LON:KIBO) itself, or in the MDC, or in the MCPP) which will detract from its own share. That the second notion is nonsense can be seen from the formula for NPV – which is Long Term Profit (P) less cost to build (C). This is a crude approximation because in practice the timescale for uneven costs and profits is taken care of by discounting the cash flows year by year. But to simplify one can use NPV=P-C If someone were to ‘buy’ the project for its NPV he would still have to meet the capex to build. In which case he ends up with its NPV (P-C). In return for his purchase cost (P-C + C), he ends up with C, which he has had to pay out. Result: no profit – so no point in buying, and no scope for the owner to sell. (That does not mean that a partner can’t be brought in. But he would have to meet his share of the capex in return for a share of the profit.) An unfunded project might be saleable if it is exceptionally profitable, in which case a buyer could make his own profit from the margin between its profits and the cost of funding. Then, he could pay something (but still not the full NPV) to buy it and still make some profit. But for coal-to-power projects there is only a limited margin between profit and the cost of funding. Profitability is limited by the host government (who calls the shots through licensing so as to pay as little as possible for the power) to a level just enough to attract the international lenders and investors to provide the funds. At present that limit equates to an IRR of around 21%, so that any buyer for such a project would have no scope to make a profit on any margin between its IRR and the cost of funding, which will be the same for him as for anyone else. As already mentioned, what does have a value that could be sold, is work that has been done on the project, in Kibo’s case by the MDC which has spent on planning and gaining approvals and prospective partners to build and finance the MCPP. Having withdrawn its original promise to help funding, Kibo’s prospective partner, China’s Sepco III (not the same as Ncondezi Energy‘s (LON:NCCL) partner who is an operator as well as a builder), has agreed to pay Kibo half what MDC has spent in return for having first go at tendering for the construction. Paying the owners’ planning costs is normal in the industry because otherwise a contractor has to meet those costs itself before bidding. At present, some keyboard warriors are ‘hoping’ that this ‘back cost’ will be substantial (up to $20m, which is about half Kibo’s market cap so would be a useful chunk of cash). But that is pure speculation, whereas Kibo’s accounts show clearly that by now it will likely have spent only some £5m (over and above the original purchase of the coal mine, for which there is no logical reason for Sepco to pay anything) plus whatever has been spent by some advisors who have deferred their fees in the face of Kibo’s lack of funds to pay them. Sepco has so far paid $1.8m of these ‘back costs’, with the rest to be agreed in the coming week and it is hope for a substantial payment that appears to be buoying the shares. My expectation is for a payment of little more than needed to pay the deferred consultants, as well as to plug the £1.5m hole in Kibo’s balance sheet revealed in its latest interim results (apparently unnoticed by anyone). I therefore expect the shares to fall on the announcement. That fall will come after another of the chat board hopes for value crystalisartion was dashed on 23rd September through the announcement of the hiving off of Kibo’s only project with any solid value, its Imweru gold resource in Tanzania’s Lake Victoria Goldfield. Chat board estimates (taking no account of the cost to develop) ‘projectedR17; that resource to be ‘worth’ around 5p per Kibo share – the same as the then share price. But Imweru is now being hived off into a new company ‘Katoro Gold Mining’ which is planned to list on AIM to raise the first tranche of the necessary funds to establish a more solid resource and economic study, before further funds to develop any mine will be able to be raised. While Kibo will have 60% of the shares, their value will be diluted by the £1.2m (minimum) cash raise, and my estimate is that its holding will be ‘worth’ no more than 1p per current Kibo share. As a paper value and unless it manages to sell its holding, it won’t provide the cash Kibo needs to progress any of its other projects. Although Kibo says Katoro will eventually ‘deliver substantial value’ for shareholders, that will only be after raising development funds which will further dilute any value to them. That leaves MCPP as the only real value in Kibo – likely to be no more than my estimated 15p per share in issue – but only in three years’ time when the project is built and running – although that value per share might be anticipated in the market at financial close (when debt providers, contractors, the Tanzania authorities, and equity investors, have all signed up). This has been continually delayed since Kibo first promised, in late 2014, that it would be achieved H1 2015. Now, given that Kibo has yet to sign up anyone to provide the funds, or to build and operate the plant; has yet to agree a power tariff with Tanzania’s electric power co; and has yet to obtain a mining licence (whereas Ncondezi has all those things in place yet is still not expecting financial close before H2 2017), none of the facts to properly value Kibo’s shares look like being available before mid 2017 at the earliest. Even when the bankable feasibility study is published, it will only be one component of financial close. At a later date I will explain why Ncondezi Energy looks the better value. Edenville Energy (LON:EDL), though a long way behind in its own coal to power project, seems in a position to sell its surplus coal earlier, which is why its shares have perked up. But, buoyed as they are by misconceptions, Kibo shares look vulnerable, although investors’ excitement as they await the BFS, irrelevant though it will be to a valuation, might keep them afloat for a bit longer.
03/10/2016
23:43
gilbly: Good evening from Los Cristianos. All will be revealed eventually and we have to admit it is very intriguing how this will all pan out. More thoughts on asset disposal. SPV ASSET DISPOSAL & CASHBACK. Page 1 We all know that to progress MCPP towards production, unless the power element is sold off or LC pulls another rabbit out of the hat, it will be necessary to dispose of a share of the SPV assets and the final share of the assets we retain is of course important. In this repect any cashback we receive from SEPCO 3 has to be beneficial. It all depends on valuation of the project and the type of financial package LC negotiates and we could again be surprised as I think he is taking all of the challenges in his stride and will deliver to the best of his ability. LC has recourse to the extra 420 million or so shares of the 800m they are permissioned to sell. However I think he will keep this as an option and only deploy if required. He appears confident of the finance and as he says he has been working on this for a while and other options which hitherto were unavailable are now open to them. So with Standard Bank advising from the outset they must have progressed discussions to some degree re the availability of finance and concluded to such an extent to have a short list of preferred funding options pencilled in. Regardless of how advanced any progress was in relation to finance, perhaps Standard had taken this as far as they could and the Absa Bank now offers a more attractive approach towards addressing Kibo’s project objectives and financing and were also prepared to be more flexible re any retaining fee payments, thus relieving pressure on our finance situation. Perhaps Standard retaining fees were just too much, although these are usually negotiable. There may be other reasons for the bank replacement which have not been disclosed thus far. A bad press article re Standard Bank was circulating the other day, so perhaps the change was on the back of this news. The debt to equity funding will probably be on the basis of 75% / 25% or 70%/30% and perhaps it will be necessary for a degree of SPV asset disposal in order to raise this equity funding for an integrated project. Once we have the Equity funding the Debt funding is more or less ensured. Following the reduction in the Coal Capex from $38m to $17m and the reduction in coal quantity, the coal revenue of $48.4m/year is now $37.3m/year and with the 'All-in Cost Margin' reduced to 39% (down from 48%), this equates to a reduction in the coal profit from $23.5m a year to $14.53m a year, albeit EBIT. This is not an insignificant ROCE and of course this is offset by a corresponding increase in Power profits with the reduced coal / fuel supply now required. This reduction in Coal profit to $14.54m per year, results in an share price of 31p per share on a P/E of 10, (18p on P/E of 6). Of course this excludes any apportionment, interest and taxes, (No royalty payments on the coal, 12/8/2015 RNS). Page 2 So for the Coal alone, a return on a Capex of $17m is not insignificant at $14.53m per year and after 30% tax this is about $10m a year and on a forward p/e of 10 is 22p a share (13p with p/e of 6), with loan interest to be accounted for. The paybck period is short at 2.4 years but presumably the repayments will be over a period to be agreed with the lender. LC previously indicated that due to the robust fundamentals it was an attractive option for ‘Project Level Loan Financing’ (PLLF) and this would still appear to be the case even with the reduced Capex and profit which still has a short payback period. The attraction in project finance is the low interest rate of LIBOR +5% and as I understand it no loan payments until they generate revenue. So a marked improvement on the higher 15% to 21% interest rate of investment which Mr MasterInvestor advocates will be required for Institutions to get aboard. It all depends on how we progress from here and LC is obviously best positioned and knows the direction we are heading, and we currently don’t. In this regard, he has intimated it will be whatever makes the best commercial sense and there has to be different options and finance available. As ever for me, even with the reduced coal figures, it suggests immediately that the coal is so much more manageable with the smaller Capex of $17m and Equity funding of $4.25m, if required, and we would logically retain 100% of the coal, unless the coal element can be used as a great bargaining tool to obtain both a worthwhile working investment partner and an attractive financial package. It will also be easier to bring to fruition and has great potential for further exploration and expansion and increased profits associated with rising coal prices along with a negotiated contract to supply additional coal to fuel further phases of Power Plant extension up to at least 1000MW and beyond. There is also possible revenues. from coal to liquid technologies which should now have been investigated. I think they may well retain the Coal element and sell off part of, or all of the power assets. Either way LC will as he has also said he would, create value for share holders. All will be revealed. In an attempt to ascertain what degree of asset selling was necessary I calculated and posted previously (Jan 17), the amount of SPV assets we have to sell and retain in order to obtain the required level of equity funding. That computed the SPV asset disposal % and the % that Kibo would retain for various prices, ranging from 25 cents to $1.5. (then about 16p to a pound). The Coal Capex is now $17m and the Power is ($640m to $760m) and based on the minimum, this is a total Capex of $17m + $640m or a total of $657m. So at 25% equity share we need to find $164.25m of equity funding. (The Power $160m equity funding requirement easily swamps the coal so there has to be a good reason for an integrated project.). Again for me I immediately think of questions unanswered and the big one for me iß the unstated power tariff, which can be derived from the PFS figures. As it was so large compared with the 9 - 11 cents / KWh as discussed by SM of Beauforts, I have queried this with LC on more than one occasion and still no answer. If we are still in a quandary about this I will certainly be at the next meeting asking questions. Anyway to continue, the SPV asset table is updated below in line with $164.25m equity requirement and 356m shares, however it excludes the Sanderson 2.5% holding. Note the Fx remains as per original tables. Page 3 Table 1 – Table on SPV asset disposal to raise Equity funding of $164.25m. Rev refers to the revenue which is in $m along with the M/Cap and Equity. ..1......2........3........4.........5..........6........7.........8..........9 Price...Price…....No.....M/Cap....Equity....% SPV....SPV......Buyer.....% cover ..$.....pence....Shares....$m....Reqd $m....sold….Rev $m....Equity $m....by Kibo 1.00....65.36.....356.....356....164.25.....31.57....112.39.....51.86......68.43 0.75....49.02.....356.....267....164.25.....38.09....101.69.....62.56......61.91 0.50....32.68.....356.....178....164.25.....47.99.....85.42.....78.83......52.01 0.25....16.34.....356......89....164.25.....64.86.....57.72…...106.53......35.14 The table shows that as the share price reduces, the % of SPV assets needed to be sold increases thus reducing the asset % Kibo retain. In addition as expected the Buyer’s guaranteed equity funding increases with their increased % ownership. At a $1.0 share price, Kibo retain 68.4% of the SPV asset and at 25 cents they retain only 35%. This excludes Sandersons holding which is considered in the tables below where the valuation equates to a share price which is effectively 21p and 13p for the 2 cases considered. I suppose I could have considered the power only, assuming we retain 100% of the coal, but the $160m equity required is not far removed from the $164.25m figure above, so not too much change in the figures and a reason for holding the Coal element. Keep the coal and we have $14.53m profit, albeit before interest and taxes and with no apportionment it is all Kibos. So as always it all depends on the value attached to the assets and the current Kibo fundamentals are better than expected according to LC. SPV ASSET DISPOSAL This allows for the base line valuation of MCPP, cashback from SEPCO III and Sanderson’s 2.5 % holding. I completed the calcs and then we had the Absa Bank news, but without full details, so I’ll just assume we have 3.5% to give away when required and have the equity to find. From the 1 Sept RNS re the Sanderson loan repayment, we now have the first independent baseline value for the MCPP . So a valuation of the MCPP, which till now was absent thus provides a benchmark valuation of $100m. So this allows us to establish a more accurate estimate of the degree of asset disposal to realise the appropriate funding, if asset disposal is necessary. It all hinges around the perceived valuation of the project as we move closer to financial ready milestone. Of course from the Sandersons consideration of 2.5% share for repayment of the $1.5m loan, this assigns a slightly different reduced value of $60m for the MCPP, which may also be used as a starting point for SPV asset disposal calcs. ( or Mbeya Development Co Ltd as they appear to be calling it). Page 4 The SPV disposal calculation will also be more meaningful now that we have this $100m valuation, which is about 21p a share and it is within the range of prices in the original SPV asset selling table. It is also encouraging that the valuation is within the 18p to 27p range LC referred to in the escalation mechanism for MTR exercising their warrant options. ( RNS 19/1/2016 RNS). Following receipt of the $1.8m first payment from SEPCO III, we eagerly await the negotiated final figure. In any event it would certainly be good news to receive somewhere between $10m and $20m in back costs as we do need a large amount of money if we are to retain as much of the MCPP asset as possible. In esscence we get what we get and it may be lower or higher than our expectations. For interest NCCL had historic costs of $17.5m, factored up to $25.5m in their agreement with SEP. Of course for this, SEP gained 60% of the project assets which is to be accompanied by a further $35m. I think some have suggested in the past that Kibo asset retention figure may be in the order of 30% of the MCPP. Anyway from the project approach so far it appears we are heading for an integrated project and the tables below are based on two valuation figures for the MCPP, which are the $100m benchmark valuation as outlined in the RNS and the other is based on the Sandersons arrangement of 2.5% share for a $1.5m repayment, a valuation of $60m. (About 13p a share). So looking at the disposal of the SPV assets in order for the required equity to be covered, Kibo have to sell sufficient assets to cover the Equity funding for the asset % they retain. The calculations below determines what assets we have to sell to move forward fully funded on the equity side so that the debt funding is a certainty. The 2 tables below consider the MCPP valuation cases of $100m and $60m which respectively equate to $1m and $0.6m for each 1% of asset share. In addition the tables consider the following 3 cases for SPV assets disposal, a) without cashback b) with a cashback of $10m and c) with a cashback of $20m from SEPCO III, which may be on the high side.. In the tables the required equity funding will be covered by: - the Kibo equity, comprised of the revenue from the % SPV assets sold, plus the cashback from SEPCO for a share of the backcosts. - the equity funding to be guaranteed by the Buyer for the SPV asset % purchased. - the equity funding due according to Sanderson’s 2.5% holding Any buyer is responsible for the required Equity funding based on the % of the SPV assets they have purchased. Page 5 Table 2 - SPV asset disposal to realise the required Equity funding ($100m valuation). Table is based on the benchmark valuation of $100m, which is $1m for each 1% of asset and assumes a required Equity of $164.25m and allows for cashback and includes Sanderson’s 2.5% holding. Cash back and Equity figures are in $m. Cash.....Reqd......%.......%.......%......Buyer.....Sands......Kibo Back...Equity.....Sold....Sands....Kibo....Equity....Equity....Equity 0.......164.25.....60.60....2.5....36.90.....99.54....4.11.....60.60 10......164.25.....56.82....2.5....40.68.....93.33....4.11.....66.81 20......164.25.....53.04....2.5....44.46.....87.11....4.11.... 73.04 The cashback is included in the figure for the Kibo Equity. Row 1 is without cashback and Rows 2 and 3 are calculated on the basis of a cashback of $10m and $20m respectively from SEPCO III. As expected we see that as the cashback increases the asset disposal, the Sold %, reduces, so Kibo retain a higher % of the assets and are able cover more of the Equity, which includes the cashback. The last row of the table for example simply says the cashback is $20m, the Equity required is $164.25m, the % Sold is calculated to realise adequate equity coverage and is 53%, Sandersons share is 2.5%, Kibo % retained is 44.5%, followed by the respective Equity covered by the Buyer, Sandersons and lastly the Kibo Equity which incorporates the Revenue from the sale and the appropriate cashback. Ref to the last row. To check Kibo Equity, using the valuation of $1m = 1% of asset, the revenue from the sale of 53.04% of the asset is 53.04% x $1m/1% = $53.04m. The Kibo equity is then the Revenue + Cashback = $53.04m + $20m = $73.04m. This is 44.5% of the best $164.25m equity required. The % should sum to 100% and the Equity should equate to the required equity total of $164.25m. So for Table 2, on the basis of a $100m valuation, without a cash back we retain a minimum of 37% of the asset, with a $10m cashback we retain 40.7% and with a $20m cashback we retain 44.5% of the asset. So that is the results for a valuation of $100m for the three cases considering, no cashback, $10m cashback and a $20m cashback. The table below is similar but with a reduced valuation baseline. Table 3 – SPV asset disposal to realise the required equity funding. ($60m valuation). Despite the fact we have a $100m valuation for interest, and for a more pessimistic viewpoint, I have calculated the table on the basis that the SPV asset disposal is the $60m valuation as derived from Sanderson’s loan settlement of 2.5% for the $1.5m. Page 6 This is equal to $0.6m for each 1% of asset. It considers the same equity of $164.25m and includes cashback and Sanderson’s 2.5%. Cash....Reqd.....%..........%.......%.......Buyer......Sands…….Kibo Back...Equity....Sold....Sands.....Kibo..…..Equity....Equity....Equity 0......164.25.....71.41....2.5.....26.09....117.30.....4.11....42.84 10.....164.25.....66.95....2.5.....30.55....109.97.....4.11....50.17 20.....164.25.....62.50....2.5.....35.00....102.64.....4.11....57.50 So for Table 3 with a reduced value of $60m attached to the assets, (about 13p/share), without cash back we retain 26% of the asset, with $10m cashback we retain 30.5% and with a $20m cashback we retain 35% of the asset So ultimately, it all depends on the value attached to the assets so the release of the final figures should confirm that the Kibo fundamentals are still better than expected. More news will be released as we start the financial arrangement process and the project valuation should improve above this $100m base line figure and with it an increase in the % of SPV assets Kibo retain. So that indicates the % of SPV assets Kibo have to sell to cover the equity for the % they retain and it all hinges around the project valuation and what investors will pay. I think LC will negotiate a good deal on any disposal of assets, which may or may not be linked to a second power plant MW phase and if it is, then perhaps we have another leverage tool to obtaining an improved deal. LC has recourse to the extra 420m or so shares of the 800m they are permissioned to sell. However I think he will keep this as an option only if required and of course may opt for a combination of asset disposal and a share issue if required, who knows. Most of us do realise that we don't get a free ride and we have to surrender assets in order for the project to come to fruition. That is what business is all about, raising money by going to the market or existing shareholders, or sacrificing ownership and disposing of an asset such that the small explorer/developer has the necessary funding to proceed towards their end goal and often it is not an easy job. However the final outcome should be rewarding for those patient enough to wait, regardless of how LC plays it. Sweet dreams.
13/9/2016
15:07
mrkeysersoze: No Simon, MTR have to pay a minimum of £900k dependent on the KIBO share price at the time of conversion see below.... -- Kibo to issue warrants to Metal Tiger for 10 million new ordinary shares in Kibo at an exercise price of 9p exercisable within a three-year term and subject to two exercise price increases, the first to apply if Kibo shares trade at 18p or higher for 15 consecutive days -- In the event that Kibo's listed closing mid-market share price on the AIM market of the London Stock Exchange ("AIM") exceeds 18 pence (GBP0.18) per share for a consecutive period of 15 days in which AIM is open, then the exercise price of any unexercised warrants shall increase from 9 pence (GBP0.09) to 14.5 pence (GBP0.145); -- In the event that Kibo's listed closing mid-market share price on AIM exceeds 27 pence (GBP0.27) per share for a consecutive period of 15 days in which AIM is open, then the exercise price of any unexercised warrants shall increase to 19 pence (GBP0.19)". http://uk.advfn.com/stock-market/london/kibo-mining-KIBO/share-news/Kibo-Mining-Plc-Morogoro-Gold-Joint-Venture-Commen/65636971 Mr K.
03/8/2016
21:43
tadtech: I think this is another reason why the share price fell away today. http://www.shareprophets.com/views/22701/kibo-mining-a-case-study-in-greed-from-sanderson-and-beaufortr It's worth a read only to see how much Beaufort and Sanderson have made out of Kibo (and others) during a period of nigh impossible fundraising due poor market conditions. I have been convinced for as long as I can remember (going back to the 1.5p days) that 'entities' have been at work on the Kibo share price. An article by Ben Turney threatened to expose the sharks but he decided not to publish or reveal who was responsible. Shrewd market participants 'know the game' nonetheless. The only time Kibo shares have really broken out was when the convenient chain of broker placing after placing was broken when Metal Tiger provided, without notice to Hume Capital, an initial £150k and then another £300k. The 'shock' of this event meant the 'entities' had to scramble to close out of short positions, the result being was the intra-day rise to 12p from under 2p. Until Kibo (and others) who rely on placings to continue to fund operations get into a position of cash generation the sharks will continue to play their games. These 'games' have to be considered when buying AIM stocks that are not cash generative. Today's announcement tells me that LC is expecting SEPCO to finally cough up before Kibo have to repay Sanderson, the litmus test is will they? DYOR etc
20/4/2016
09:16
gilbly: Extension to the previous post. D. POWER ELEMENT The government goal is to make power accessible to a greater percentage of people in Tanzania. Therefore the power tariff will have to be affordable and remain attractive enough to encourage the IPPs to invest in the country. The all-important power tariff will eventually be settled based on the draft model PPA document assembled by EWURA and as outlined in 11 Jan 2016 RNS centred on a set of principles to be agreed in an MoU and used as a reference framework to finalise a tariff, which is acceptable not only to TANESCO and Kibo, but to the regulator EWURA. I think that both parties must know the tariff they want and what they will accept, so the DFS should not be delayed as a result of PPA finalisation, hopefully. The web site timelines would appear to indicate that the PPA follows after the DFS, according to the interactive box links and the red text indicates the added complexity with continuous interaction in the processes. According to RNS in July, the PPA is within the DFS so slightly different from the Timelines which imply PPA after DFS. MPPA link is hxxp://144.76.33.232/wp-content/uploads/2015/08/Model-PPA-for-Coal-fired-power-generation.pdf The electricity tariff and the cost price of producing the Power per KWh will determine the profit margin per kWh and from the energy generated, this will yield the overall Revenue and Profit generated per annum. A first phase of 2 x 150MW generation sets of course ensures that one power generating set can be available and so reduce the power loss from outages. The current PFS figures for the power illustrate essentially favourable fundamentals and as LC stated better than expected. The recent RNS indicated the PDFS is completed subject to a review and is well within expectations, so it all looks very promising. The current figures from the PFS are: POWER PFS. - 1,841GWh to 1,877GWh per annum based on an 80% baseload. (Note basic 80% of FL is 2628GWh Max X 80% = 2102.4GWh) - Power revenue $7.8 to $8.4 billion over life of PS of 25 years. - NPV is $230m to $280m at a 15% discount rate. - CAPEX is $640m to $760m. - IRR in excess of 23%. - Payback period 8 to 9 years The current NPV of $230m to $280m and other financial metrics are likely to be updated after the review of PDFS, which is now completed and this should be released shortly, followed by the MDFS afterwards, which then leads in to the Integrated Bankable Study which should be completed by end of Q2. Combined with the Coal NPV of $211m - $219 this is a combined project NPV of $441m to $499m and the final DFS results are likely to have a bearing on these fundamentals. Some thoughts on the factors relating to the electricity tariff and power profit estimates are covered below. The current Power NPV of $230m with 365.4 shares is about 42p a share as valued per Beaufort calc. The power PFS excluded the electricity tariff, cost price of Power and therefore profit margin so we have await the DFS final reports re the tariff and commercial off-take, if any. However we can work out the profit for each cent of change in tariff rate and although we don’t have the tariff, we can work out the unstated tariff rate from the figures supplied in the PFS. In addition we can try and estimate the Power profit from what we know and this is considered later below. 1) Electricity Tariff At the outset, a fair domestic tariff is likely to be above the 9 to 11 cents/kWh modelled by Beaufort’s Sheldon Modeland in a June interview, but below the 18 to 35 cents kWh as LC advised in the Mining Weekly interview on 4th September 2015. http://www.miningweekly.com/article/kibo-says-tanzania-power-project-will-be-competitive-2015-09-04 When SM was asked about the project, he spoke of the sensitivity of the tariff in the model and indicated he had used 10 cents/kWh and the model results change significantly over the 9 to 11 cents/kwh tariff range. So the above range has to be our electricity tariff starting point and any thing higher will be a most welcome bonus. 2) Profit Figure for Each 1 cent/kwh on the Margin In addition to the fundamental figures from the PFS, as posted previously an important fact we derive from the PFS energy range of 1841GWh to 1877GWh, or using the average energy of 1859GWh, this yields: “For each 1 cent/kWh rise in tariff margin the power profit increases by $18.59m per year”. So regardless of the eventual tariff level this is a constant profit per 1 cent/kWh increment, unless the energy figure changes per year. An important fact to remember once we know the tariff, cost price and profit margin per kWh. For the moment, the electricity tariff, cost price and the actual profit margins are not in our domain at present, but it will be an interesting feature in the Power DFS which should be issued ‘shortly’ after reviewing, as they will have to commit to some figure eventually and if the PPA discussions are still on-going, then amendments may be necessary as required. From above on margins of : - 2 cents, the tariff would give $37.18m power profit per year. (coal is $23.5m currently). - 3 cents, the tariff gives $55.77m power profit per year. - 4 cents, the tariff yields $74.36m power profit per year. So the tariff is fairly sensitive as signposted by Beaufort 11 June 2015, and if we consider a tenth of a cent change, this equates to a change in profit of $1.86m per year. 3) Power Tariff Comments The electricity tariff is undisclosed in the Power PFS ( although we can derive a value, see 7. below) and therefore the tariff and in particular the cost price of power and the resulting profit margin on the tariff are key factors to be announced for the Power generation element and are meaningful and positive outcomes which are eagerly awaited. Furthermore it is imperative of course that the final tariff is both affordable whilst ensuring that power provision is made available to as many people as possible and at the same time profitable for Kibo. See links and notes below for indication of pressure in keeping tariff low a) In the link dated 29 May 2104 - TanCoal had demanded to be paid USD 12 cents/kWh, while Tanesco wanted to buy between 5 and 6 USD cents per unit. http://allafrica.com/stories/201405290841.html b) Link below dated 17 June 2015 – Establishment of Ngaka Power Project has been delayed because of lack of an investor with proper tariffs, the Deputy Minister for Energy and Minerals, Charles Kaijage has said. He revealed in Parliament that the investors, whom he did not name, had quoted expensive tariffs that were deemed not viable for the project. (I think it was Tancoal). "Coal-fired electricity cost between SIX to EIGHT US cents, but they came with tariffs which I am ashamed to say here," he said. So for Kibo, perhaps an optimistic starting point for the cost price of power could be in the region of 8 cents/kWh or thereabouts and even tending up to a cost price of 9 cents/kWh. http://allafrica.com/stories/201506171239.html c) Link below covers application to EWURA for Tariff reduction hxxp://www.ippmedia.com/frontend/index.php?l=89405 In the above, TANESCO announced they had asked the Energy and Water Utilities Regulatory Authority (EWURA) to approve a power tariff reduction of 1.1 per cent effective from April 1 this year, and a further cut of 7.9 per cent effective from January 1, 2017. From this, I estimate a reduction from 350TSh or 16 cents/kwh to 14.6 cents/kWh, however it would appear from the Tariff Adjustment Application in d) below that the 350 cent/kWh rate is being maintained for 2016. In addition, the links below, dated 2 April 2016, confirms that the proposed tariff cut of 7.9% for Jan 2017 was blocked by EWURA and would be resubmitted by August 31 this year for the same planned reduction of 7.9% for Jan 2017. hxxp://www.ippmedia.com/business/former-energy-ps-warns-against-tanesco-tariff-reduction or hxxp://www.inlivenews.com/ewura-stops-lower-tanesco-tariff-plan/ This is obviously driven by the government in an attempt to keep rates low and allow many more people to link up to electricity access. d) Tariff Adjustment Application re the link below hxxp://144.76.33.232/wp-content/uploads/2016/02/TANESCO-TARIFF-ADJUSTIMENT-APPLICATION-FEBRUARY-2016.doc From the link, TANESCO’s Tariff Adjustment Application, page 3 shows that they have been using the 2013 approved tariff, and the 350TSh will also apply to 2016 (Table 4) for the Domestic rate above 75kWh. This document indicates further (Table 1) that TANESCO are projecting an average Tariff Requirement or yield of 272 TSh for 2016 and 250.62 TSh for 2017. So it appears from the latter they require about 11.5 cents/kwh in 2017, so perhaps still scope for Tanesco’s domestic tariff to be above this level going forward to discussions with Kibo. Therefore thinking about the 2017 tariff level and assuming that the August resubmission of the planned reduction of 7.9% goes ahead, TANESCO may settle on a domestic tariff of 350TSh reduced to 322.35TSh, or about 14.7p. So if the reduction in tariff rate proceeds, I think the Kibo tariff rate may be just below this figure. See estimates of tariff in 4) and 5) below. So we can see at the front end of negotiations there will be huge pressure to supply electricity to as many Tanzanians as cheaply as possible and the link quotes a target of 75% of the population with access to electricity by 2025. The EWURA Draft Model PPA should help speed up the process and hopefully we are near the point of agreement on the MoU setting out the terms of reference to be used in the PPA negotiations. From the tariff adjustment link - The tariffs apply from 1 April 2016. Also the proposed adjustments for 2016 and 2017 are subject to automatic adjustments for inflation, currency fluctuation and change in fuel prices, as per Tariff Setting Rules and as modified by the EWURA Regulatory from time to time. 4) Power Tariff and Profit, a Conservative Estimation. Using Beaufort’s mid-range price of 10 cent/kwh and a cost price of 8.5 cents/kwh, which is just above the 6 to 8 cents/kwh referred to in the Web link in 3) above, we have a fairly conservative 1.5 cents profit per kWh. Using the profit rate from 2) above where, “1 cent/kWh margin equals $18.59m profit”, this equates to $18.59m/cent x 1.5 cents profit, which is $27.9m a year. Added to the current coal profit of $23.5m this gives $51.4m per annum for Coal and Power together. With 365.4m FD shares, this equates to 94p on a P/E of 10 and on a lower P/E of 6 is 56p. (Now 366.724m with Sandersons batch). So that is my estimated safe figure which is 15% of the mid value of Beaufort’s 9 to 11 cents/kwh range. (Obviously this assumes Kibo ownership at this stage and producing). 5) Power Tariff and Profit, a Less Conservative Estimation. Possibly less conservative is the assumption that we have a top end tariff estimate of 13 cents/kWh and with a cost price of power of 8.5cents/kWh, (say 9 cents/kWh) this gives a 4 cents profit. Yes it is only speculation for the present, but if this was the case, it amounts to a power profit of 4 x $18.59m or $74.4m, which combined with the Coal profit of $23.5m is $98m per year before deductions. If this was the case, I would accept that level of profit for the coal and power, which on a P/E of 10 is worth 178p and on a lower P/E of 6 equates to about 107p per share, when producing. TANESCO’s domestic charge is 350 TSh/kWh or 16 cents/kWh and if they make 1-2 cents/kWh, then we may push up higher to 14 cents/kWh, but it has to be affordable and there will be immense pressure to keep this as low and inexpensive as possible. Also it appears that with a possible 7.9% rate decrease to be re-submitted in August, perhaps pushing for a 14 cent/kWh tariff would leave TANESCO with insufficient profit. So a lack of profit is nothing new for TANESCO according to the announcements this month and must be a major concern. Therefore 13 cents/kwh remains my top end tariff estimate and perhaps this may result in a profit around the 4 cent/kWh mark as above. The 14 cents is just a touch adventurous I feel, but who knows and all will be revealed ‘shortly’. So 4) and 5) was my best estimate / guesstimate of a profit of 1.5 cents to 4 cents/kWh. Edited later - Perhaps I should have considered only the averages. i.e. 10 cent/kWh tariff minus a cost of 7 cent/kWh, which is a 3 cents margin. Using the safe figures, a 9 cent/kWh tariff minus a cost of 8 cent/kWh gives a min. 1 cent profit and a more optimistic view gives 11 cents/kWh tariff minus a cost of 6 cents/kWh which is max. 5 cents margin, with an average profit of 3 cents. - Edit end. 6) Commercial Off-take Agreements. The above excludes any commercial power off-take agreements and it is strange that we have not heard any peripheral news on this. Possibly LC has been conservative with the profit figures issued and deliberately keeping the profits low key, as EWURA, in setting the tariff rate will no doubt be scrutinising the potential earnings with a view to squeezing the tariff to as low a value as possible, thus improving the TANESCO situation which looks somewhat bleak at the moment. In EDL’s 120MW Feasible Study, they incorporated commercial off-take figures and inspection indicates the NPV increases from $220m for a base case with a single buyer to $320m with off-take power at 40% production at variable commercial rates. So EDL estimated a substantial increase of about 46% when the off-take case is considered. This however may not be applicable for Kibo, as it is a different situation. However if it did and we apply this to Kibo’s NPV range of $230m - $280m it gives a minimum of $335m with a combined coal and power NPV of $546m. So any off-take has the capacity to inflate profits, assuming that EDL are not barking up the wrong tree. It does on the face of it however appear a pretty ambitious premium on the flat rate tariff and so await the release of the final figures for Kibo. These rates of course may not have been officially agreed upon and are maybe only commercial off-take estimates by Lahmeyer for the EDL Feasibility Study. Interesting that Lahmeyer, as far as I know, is now a subsidiary of Tractobel. So it will be interesting to see what transpires regarding the outcome from any commercial off-take negotiations. The above scenario may be well wide of the mark with regards to the Kibo position and obviously there may be potential to increase the power profits via the power off-take agreements if they are there, but not necessarily at the aforementioned level. For example, contributing towards the figures we may have higher commercial off-take tariffs and as a consequence it may be at the expense of preserving a lower domestic rate, as there will be pressure to keep this low and affordable. Naturally from Kibo’s point of view, it has to be affordable to enable Kibo to pay off the debt and equity funding involved. EDL call the figures robust and in terms of industry costs to develop the project it appears low at $1.45m/MW, with Kibo costs about $2.4m/MW. Therefore on the negative side, their low cost per MW may be indicative of a low estimate of the Capex value used, leading to a more elevated NPV as a result., but even so the NPV ratio still looks high. Also looking at their unstated tariff, from EDL’s FS figures, this works out at 7.8 cents/kwh for the base case and 10.08 cents/kwh for the power off-take case, which is an increase of about 30%, however the former tariff looks somewhat on the low side. Perhaps the revenues stated are just indicative values without any intent to be accurate. 7) Unstated Tariff from the Power PFS I was reasonably happy with the Coal and potentially up to 4 cents/kWh profit I estimated for the Power, if this could be realised, then I recalled from a previous post that we derived the unstated electricity tariff from the PFS figures. Using an average energy of 1859GWh from the PFS figures and an average revenue from the $7.8 to $8.4 billion, which is about $8 billion turnover, the average electricity tariff over 25 years is: $8 x 10^9 / (25x1859x10^6 KWh) = 8/(25x1.859) = $0.1721 or 17.2 cents/KWh. (15.4 cents/kWh if we assume 28 years.) This unstated tariff at 17.2 cents/kwh looks too high for me, but it is derived from the Power PFS figures. Although high, however it is less than the 18 to 35 cents/kWh LC referred to. As the 80% FL is 2102 GWh, it looks as if the stated energy values are of the correct order, so have they overstated the revenue amount in the PFS? Alternatively is it a level which allows for future price rises over the period or just an indicative value or even a rogue value or is it just an intended target value that they have concluded, is a value in the future? Perhaps it is a representative figure of the tariff average resulting from an estimate of both a domestic rates and a commercial off-take agreement rate. Who knows, but I did ask LC the question. I know it is obtained indirectly from the PFS figures and if the revenue is a rough value it should be stated as such. So yes, it appears unrealistic to have a tariff of 17.2 cents/kWh against the existing TANESCO domestic tariff of 16 cents/kWh, unless of course this was the commercial tariff they were working on at the time in the model and just included the corresponding revenue range in the PFS report accidently. 8) Rough NPV Figures To check this out I performed some Power NPV calcs. using a tariff of 17.2 cent/kWh and it certainly produced a relatively high power NPV figure, fairly remote from the actual PFS result. However utilising the 9 – 11 cents/kWh as modelled by Beaufort, this gives realistic NPV values and 10.3 cents/kwh yields a value close to the low end NPV. Note this is just a basic calc. in comparison with the sophisticated model they will be utilising, however it is useful when trying to establish if ball park figures are reasonable. Even in my rough model the sensitivity of the tariff was apparent on the NPV as SM of Beaufort has previously stated. As we thought above, how can we possibly have a 17.2 cent/kWh rate if the current TANESCO domestic rate is 16 cents/kWh and in the longer term it may possibly reduce further. 9) Figures that result from Tanesco tariff adjustment application doc. The link below is TANESCOS’ Tariff Adjustment Application and page 3 shows that they have been using the 2013 approved tariff. This indicates further that they are talking of an average required tariff of 272 TSh for 2016 and 250.62 TSh for 2017. The latter must be about 11.5 cents/kwh, which is an average from all the rates. hxxp://144.76.33.232/wp-content/uploads/2016/02/TANESCO-TARIFF-ADJUSTIMENT-APPLICATION-FEBRUARY-2016.doc. Inspecting the document further shows the situation TANESCO are in prior to considering any tariff reduction. Bottom of Page 5 states: The current tariff regime yields average revenue of 274.90 TZS/kWh, yet the revenue requirement target for TANESCO in 2015 was 348.68 TZS /kWh and projected to be 272.00 TZS/kWh in year 2016. The shortfall of 67.78 TZS/kWh (26.8%) in year 2015, restricted the ability of the company to provide the services required to meet its obligations to both its lenders and its customers So despite them wanting to decrease the tariff further, TANESCO are currently suffering large losses and 49% of the business is to be placed. So if they are currently losing mega /- who will buy the share offer. Tanesco’s situation cannot be helping in the negotiations. The gov. and national banks have to bail them out with loans, and to encourage investment, if the tariff level cannot be raised, some radical changes will probably be pursued to turn the company around into a profitable organisation. In the meantime they may suffer drastic reductions in important service and maintenance work on its power infrastructure, and this will lead to possible power cuts. They can’t be losing money forever and a reasonable tariff settlement may help solve their money problems. From The Guardian, both the World Bank and IMF have been pushing the government to allow TANESCO to raise power tariffs to end the use of subsidized funds to the utility. TANESCO themselves warned in a letter to EWURA that to cut the tariffs even further than as indicated would paralyze the company’s financial capacity and risk driving it out of business. The TANESCO MD Felchesmi Mramba sums it up a succinctly on page 1 of the Tariff Adjustment document; “The unavoidable reality is that no enterprise can provide the service that its customers seek if it loses money on every unit of output that it sells”. Note a previous link posted indicated that the Gov. want Tanesco to build, as against hiring generating plant and this may assist in reducing power costs in the long term. So perhaps this is a great opportunity for direct involvement in the MCPP working alongside Kibo. 10) Power Profit and Discount Rate (DR) The tariff, power cost price and the resulting profit margin will affect the generated power profit and NPV, however in addition a further improvement in the NPV and IRR may be obtained by considering the DR used. The Power NPV value is based on a 15% DR which is likely pitched on the high side as it most probably accommodates a high degree of risk. A higher DR is safer, resulting in a lower NPV, which may be attributable to LC’s conservatism and a lower value will lead to increased NPV figures. (Note that a 5.5% DR is used for coal). Perhaps with the Power studies completed this may de-risk the power element further and perhaps they will adopt a DR of 10% to 12% for the power plant. Based on a reduced DR of 12%, my very rough calcs estimate the NPV at about $360m over 25 years. Any improvement obtained or changes to the final figures will be reflected in the rest of the financial metrics such as revenue, NPV calculation, payback period, ROI, IRR etc. and if the initial figures were quoted as being better than expected then perhaps we will be pleasantly surprised with the finals which to-date they quote as well within expected. 11) SPV Assets From the recent interview, it’s comforting to know that any equity release in the MCPP will be raised at a decent premium to the current share price, which LC considers is very cheap. But at what premium to the share price does LC expect and what would it actually rise to? Bearing in mind the elevated heights we have already scaled and will we surpass the 9p levels again? ( I think the the intra day was possibly higher near 12p). Attempts to ascertain the level of SPV asset sell off have been made in previous posts (34800, 36518 an edited version of 36342) on the basis of a range of prices from 25 cents to 1.68 cents per share. (January 17 I think). A part of this is shown below for this price range and for $169.5m equity for the integrated project. This illustrates the level of assets that would have to be sold at the corresponding prices without issuing more shares. Table on SPV asset disposal and full Equity raising. Table for Scenario 4 - Equity funding of $169.5m. (Rev is revenue). ..1...........2.............3..............4.................5...............6...............7............8............9 Price ...Price in...N-No.....Worth...Tot equity ...% SPV....SPV....Buyer...% covered P in $....pence....Shares....PxN.....cover $m....sold...Rev $m...Equity $m....by Kibo 1.68.....109.59.....331.....555.00.....169.50......23.40....129.84.....39.66.....76.60 1.50......98.04.....331.....496.50.....169.50......25.45....126.36.....43.14.....74.55 1.25......81.70.....331.....413.75.....169.50......29.06....120.24.....49.26.....70.94 1.00......65.36.....331.....331.00.....169.50......33.87....112.10.....57.40.....66.13 0.75......49.02.....331.....248.25.....169.50......40.57....100.73.....68.77.....59.43 0.50......32.68.....331.....165.50.....169.50......50.60.....83.74.....85.76.....49.40 0.25......16.34.....331.....82.75......169.50......67.20.....55.60....113.90.....32.80 As we see from the table as the share price reduces the % of SPV assets needed to be sold increases, as expected, and correspondingly the required guaranteed equity finance increases for the buyer, as in Col 8. At a high $1.68 value, Kibo retain 76.6% of the SPV asset and at the lower 25 cents they retain only 32.8%. This reveals the enormity of retaining a high percentage level of the assets. But note that this was without adding or changing the 331m shares. This is only an indication of what assets would have to be sold for the above price range, without any dilution by selling shares. Obviously the option to sell the SPV assets without issuing more shares is highly dependent on the valuation attached to these assets as the table shows. 12) Raising the Equity Funding Debt funding will be arranged from the banks on the proviso that the Equity Funding can be obtained by Kibo and potential partners. ‘Project level loan financing’ was discussed regarding the coal element and it was deemed an attractive option due to the robustness of the figures and the RNS covered the loans at 70%/30%. The ratio 75%/25% was also referred to later so we just have to wait and see what they arrange. Whether Kibo retain sole ownership or indeed any sort of ownership or not is another question, nonetheless the current profit of $23.5m per year, EBIT, is not an insignificant return for a CAPEX outlay of $38m. 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. So LC may opt for a share placing of New shares on the market combined and/or a direct investment by interested parties, hopefully at a much higher price than we are currently at. We then have to accept the dilution. The advantage of selling a % of the SPV assets without issuing shares means no dilution, however if we have to issue/sell more shares, so be it. If you need money you have to raise it in the market or dispose of a share of assets to raise equity funding. That is the whole purpose of the market place, to allow companies to raise finance. Financially if we raise equity funding which involves repaying, at any rate you want to choose, say a 15%, or 20% return on investment, it is likely to be a large chunk of interest payments either way. This is fine and not a problem if we generate adequate revenue to easily fund this. In addition the higher the tariff and corresponding profit margin, then hopefully the higher the share price will be and consequently the better the prospects for arranging finance, where we have an investor looking for a return of 15% to 20% per year. Indeed with Kibo having pretty decent and robust fundamentals, then we may attain a lower and more competitive rate of return if the deal looks an attractive opportunity to investors for the capital employed. We need a minimum equity of $169.5m as an integrated project and $160m for the power only. So we only need $9.5m (at 25%) to start the coal development. If LC is raising funds by issuing shares, it is unlikely that he will sell off the extra shares cheaply to take them to the 800m shares that they can possibly have in issue, as this will not raise a huge amount of funds. For example if we double the FD 365.4m shares, this would raise £18.27m ($27.4m) at 5p, $54.8m at 10p and $82.2m at 15p. Even if we sell 434.6m shares to meet the full 800m shares permissioned to sell, at 5p this raises $32.6m, at 10p this gives $65.2m and at 15p this raises $97.8m. Still short, but note that the latter is about 57.7% of the $169.5m equity funding required for the integrated project, without disposal of any assets, but we still need to raise $72m. To raise the full $169.5m equity funding requirement, it would need the 434.6m extra shares to be sold at 26p and in so doing we have to accept that dilution has to be a factor to be reckoned with. I did a previous post estimate selling off Imweru at 10p a share, which now raises £36.5m or $ 54.8m, and represents 32.3% of the equity funding needed and the remainder is available for disposal. Lubando may be a possible sale also and may contribute another 9%. This would be a brave and bold approach but none the less, if it is necessary, then it may be an available option open to Kibo. Another option and would need funding, is to prove up the resources to Bankable and start to mine Imweru solely or jointly but it is likely to take too long, so selling may be the preferred option to raise funds. Barrick own a 10 % free carry up to the time they decide to mine and have to contribute or be diluted to a 2% smelter royalty rate. They also have first refusal at the BFS stage at an agreed market price. In perspective, the Imweru 550K oz of gold is worth $660m out of the ground, whilst the coal for the PS feed at 1.48mt/year, is worth $48.5m per year and $1,356m over 28 years, so quite a difference on just the coal alone. The double whammy, suppose we sold Imweru and also issued the 434.6 m extra shares at 15p say, this is $54.8m + $97.8m = $152.6 which is 90% of the assets retained and we need about another $17m, which by comparison is quite small. Yes issuing the extra share results in dilution, however we may then be on our way to 100% retention, although it is a fairly large jump from 365.4m FD shares to 800m shares in issue, but the share price may compensate for this. As LC indicated there is nothing cast in stone and whether the projects are to be split or integrated, this and the finalised financial package will be down to, whatever makes the best commercial sense, as he says and hopefully it will be beneficial to all. I also did some estimates re selling the SPV assets off on the basis of different equity amounts. 13) Mining Maven’s Gervaise Heddle He thinks we will retain 10% to 50%. I think he is far too conservative. A 10% share of the equity required is worth $16.95m, which is less than for 1 year’s coal production and sales revenue of $23.5m, assuming the same feed as the PS. So certainly at 15p a share, GH’s 10% retention value still looks low. However we would have to attain that level price wise. Say we generate $24m/ year from the coal and raise $40m from the coal sales over the construction period, we have 25% of the $160m equity funding required for the Power project, neglecting deductions. Also if projects are integrated, we have 23.6% of the coal and power assets. Of course only if it was all that simple, it is easy to say on paper but harder to expedite. They don’t need all of the finance in place in one go. Looking it another way, If we sold Imweru at 10p a share and raise £36.5m or $54m we would have funding for a 33% share of the Power SPV assets and 31.8% of the project if integrated Then we later add to this from the coal export/sales to further reduce the equity required. Remember they appear confident of extending the gold resource by potentially 40% to 80% so Barrick /Acacia may be interested and as a 10% holder, they will know the full potential of the gold there also. 14) Timelines and PPA Looking at the Presentation and the Timelines the indication is the PPA negotiations still follow on after the PDFS. (As they did in the August presentation). So a draft or provisional agreement may be appropriate. However a July RNS last year stated: ‘In addition, the Definitive Feasibility work will also include negotiation and agreement of the terms of a Power Purchase Agreement, Implementation Agreement and Environmental Impact Assessment with the appropriate Tanzanian Government bodies’. The RNS on 11 January says they were finalising a MoU with Tanesco on the PPA and the parties identified an agreed set of principles to guide and direct the PPA development to be used as a reference framework when they jointly develop and implement an appropriate PPA for the MCPP. So this framework has to be agreed first before they finalise the PPA. The whole point of the DFS amongst other outcomes is for it to demonstrate the Technical and Economic viability of the project. So the power tariff will certainly be firmed up sufficiently in order to facilitate the issuing the PDFS, if it is to be on time, even if it is only provisional and subject to a review and signing. Both parties must know what tariff rate they want and what they will accept and I would imagine any provisional agreement will have been vetted by EWURA By the very nature of the financing involved, the PPA agreement may not be fully finalised until the lenders of the finance are satisfied with all of the details and I think until the finance is settled any PPA tariff may be subject to amendment, particularly by the lenders, for obvious reasons, no finance then no project. As LC has indicated, the fundamentals are robust with more than adequate IRRs, so I would think that any tariff provisionally agreed with TANESCO is probably the final one. Nice and neat if they settle on a tariff now and a PPA is issued. There is huge pressure to keep these rates as low as possible and this is being driven by the government. There should not really be any dubiety about any of the timelines and I feel they should have had this all mapped out so they can see the critical path and take appropriate action and announcements. So there you have it. I’m off tomorrow to Tenerife. Hope we have some news shortly. It's all starting to get interesting and once all of the work studies, permits, permissions, agreements and finance etc are all pulled together, it may impress and become even slightly more exciting in the future. GLA Gil
20/4/2016
09:15
gilbly: Morning. Very little internet these day. Sad when you have to go to the Library. I still have this queasiness and have had lots of test done but still have persistent sickness all day. Tomorrow we are off to Tenerife so looks like no beer and wine again, but I have to say I never missed it last trip. So hopefully the sun will help. Anyway I have been trying to keep busy and as ever end up contemplating where we are and the figures we have to date and what will be issued shortly. I have enjoyed reading some of the post when I gain internet access, but mainly when out shopping. So keep the news flowing. Thanks also to Mr K for his research and sharing his discussions when he manages to contact LC. He does not have to divulge this info and chooses to share it on the board, so everyone should be grateful for this on both boards. We know that it should be very interesting with the news flow expected and it should place us in the enviable position of having all the study work competed and behind us with only a small matter of the finance to finalise and then on final closure it will all become a reality that this old project is both technically and financially feasible and moving towards the next phase. Others companies are also in a similar position, awaiting financial closure and in most of these circumstances it will take as long as it takes, as there may be unforeseen hurdles to circumvent in achieving this final stage. We all want to get there and none more so than the Tanzanian Government, however it’s how we arrive there and with what assets that causes us, the small investor concern. We are presently now in a position where the PDFS only has to be reviewed and then it can be issued. Then shortly after the MDFS report should also be published with the Integrated Bankable then following on. When we attain the ‘Financial Close Ready’ milestone will this mean the green light for the Institutions to climb aboard directly or indirectly or perhaps we might experience some slight increase in the market capital enroute to reaching FC? Just think no more studies unless we instigate them. Whatever happens we continue to steadily de-risk this project so that it will be a major prospective investment in the months to come and a great achievement for a small developer like Kibo when we do arrive. I wonder how many doubters we have out there? Hopefully after the ‘Finance Close Ready’ milestone that the financial closure process advances steadily towards the ‘Construction Ready’ milestone and is not too drawn out. The deliberations and discussions on the finance has to be well advanced, as they know the Integrated Bankable Study is on its way. We all know it is a complex and important stage we are at. I have to say I was extremely encouraged by C’s post which commented to the affect that LC was not concerned about the finance. Not too sure why it was removed on LSE. The figures have to be attractive and robust and there has to be a need for the technology and plant so in both respects we are well positioned and well supported by the Tanzanian government. When the studies are complete and integrated into a Bankable Feasibility Study, the arrangement of finance is probably the most significant hurdle we will ever have to surmount, but we should already be well advanced in terms of the discussions with banks and finance modelling etc. Only the figures in the DFSs are going to change and so are not unexpected, so they surely only have to tweak the finance model. I started off with my original post below on NPV queries only, however lacking the internet, which is becoming the norm here, I just added to it and below are some other thoughts I pencilled in on the Coal and Power elements and some points I have re-visited. No advice is intended here, it is just my own thoughts on the Kibo MCPP project. What I have found to have been a pain over the last year or so is the differences and inaccuracy in the information we receive via the regulatory news facility and interviews. There is nothing wrong if we have delays whether out of Kibo’s control or not, but if there is a delay and they know it’s coming, then it is important to keep us all informed. A. MBEYA POWER COAL & POWER PROJECT (MCPP) – PFS FIGURES The current PFS figures for both COAL and POWER elements (with the RNS updates) are shown below and we await the final PDFS and MDFS reports: COAL PFS (---- Now as per the latest RNS) - A 28 year mine life at 1.48mt of coal/year (42mt per year). - Coal revenue $48.4m to $48.6m / year. (--- Now $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 now 726% to 732%). - Payback period - 2.6 to 3.65 years. (--- Now 2.6 years). - Sensitivity - coal price and op. costs. - Coal resource of 109mt (---April 2016 - Now increased to 120mt). POWER PFS. - 1,841GWh to 1,877GWh per annum based on an 80% baseload. (Note basic 80% of FL is 2628GWh Max X 80% = 2102.4GWh) - Power revenue $7.8 to $8.4 billion over life of PS of 25 years. - NPV is $230m to $280m at a 15% discount rate. - CAPEX is $640m to $760m. - IRR in excess of 23%. - Payback period 8 to 9 years. Note from the above figures the combined Coal and Power NPV is $441 to $499 million. On completion of the Power DFS Coal and Power DFS, I think the profit figures for both will increase along with the associated NPV estimates and financial metrics, so we shall see. B. – MCPP Coal and Power NPV Queries and Beaufort Security’s NPV Value Can anybody explain why there are large differences in the Kibo NPV compared to the NPV (£) published in the Beaufort research notes? Kibo have an NPV of $211m to $219m for the Coal and a Power NPV between $230m to $280m giving a total combined Coal and Power NPV ranging from $441m to $499m. Beaufort Securities initially quoted on 11th May 2015 an NPV of £99.6m at a discount rate of 10% and they simply divided by the number of shares to obtain their target price of 31.1p and subsequent to that they similarly reported an NPV of £109.7m (33.4p/share) on 23rd Sept 2015 for the MCPP alone. (Note as in GBP the NPVs are $150m and $165m). No surprise that their most recent offering was again a speculative buy. On the same calc.basis as Beaufort share value, the combined Kibo NPV of $441m is worth 80.5p per share, a disparity order of about 2.5 times. I have not read any commentary comparing these NPV differences. Note the MasterInvestor valuation ranged from 12.8p to 31p per share, despite the fact the methodology was questioned by some. However at least they did compare all four companies they reviewed on a like for like basis. Again the answer was only as good as the assumptions. In reality, assuming the top end figure, it is no worse than the Beaufort NPV figures. He (John Cornford I think) also discounts the rule of thumb I employ of using a Buying Target up to 30% of the NPV/No. shares, a valuation I always thought was relatively safe and useful for investing. Also needless to say he shot down the NPV share valuation as per Beaufort and used by many others, obtaining a valuation dividing the NPV by Share Nos. I had some queries and did email him but never heard back. He did ever so kindly, attach a zero value to the other Kibo projects and I think he forgets everything has a value, especially when someone may want it. Just because it is in the ground does not mean the inherent value of the resource is worthless, but it’s an easy option to take. Having said that, what do I know, just look at the current price, it’s less than the Imweru ‘in-ground’ value. What troubles me is how the NPV figures can be so different for the two closely associated companies? They don’t appear to be singing from the same hymnbook. Are they not supposed to support Kibo’s case with realistic research reviews and notes? I queried this difference and the unstated tariff which can be derived from the power PFS figures (see later below) with LC and he passed my email on to Beaufort, so Kibo appear unconcerned re these differences. It would be nice to hear them discussing the inconsistency between their sets of NPV values. Are Beaufort worthy analysts or are they unsure of their calcs so they pitch the NPV lower, or as with most analysts, simply happy to stick a speculative buy on the stocks if it is not producing? Interesting to see their next research note, assuming they remain the Kibo broker. Are Beaufort actually beneficial to the Kibo operation and what’s their remit? Do they seek out potential investors with their ‘speculative buy’ recommendations and do they guide Kibo down the path to accessing loans and funding? Yes maybe they do, as we have had Sanderson’s valuable contributions, which I suppose in truth did keep us on track and with 100% of the projects for now. At least we are still in the driving seat with 100%. Surely if we are on the ascendancy they will issue an updated research note and if they do, it would be nice to have it before we move northwards and it will be interesting to see what figures they present, their justification and in particular, whether there is closer harmony with the next Kibo NPV figures. Also it will be interesting to see what the MasterInvestor site has to say on this share in a month’s time. Probably the same as he said for Sirius Minerals. But possibly he did have a point with them and the funding required. It is probably indicative of how far removed analysis figures can in actual fact be and that the answer, as one would expect, is only as good as the assumptions made in the first place. Initially I thought that perhaps the difference was down to the discount rate (DR). However, Beauforts used 10% and Kibo assigned a 15% rate, which is more conservative, as there is much more risk, so the Kibo NPV should actually be lower and it clearly is not the case. It may well be they are just more conservative in their views re the additional sustaining expenses and profit margins etc. Regarding the Power figures neither Beaufort nor Kibo released the electricity tariff, power cost price or the profit margin values. But they will have to ‘shortly’ and my effort at estimating the tariff and profit is given later below. On the DR, often 5% is used in conjunction with a 3% risk factor, making 8% a common rate and interestingly the Coal figures employs 5.51% DR which in my view is indicative of the reduced risk attached to the coal element. C. COAL ELEMENT 1. Coal Profit From the PFS report, the profit on the coal is $23.5m per year before deductions and with 365.4m FD shares this yields 43p per share based on a P/E of 10, when producing. Note the shares numbers changed with the second batch issued to Sandersons The coal NPV is $211m - $219m after tax and equates to an indicative 38p per share, on the same basis as Beaufort used. (i.e. NPV/No. Share). Strange concept that we own both projects and will be digging the coal out of the ground and supplying it to and charging it to a power station, which is our power station. So perhaps with twin tracked projects we will have more control and be better positioned in the discussions when the Power tariff is being settled, which should not be that far away, if we are lucky. The final Coal figures will improve as LC has been conservative in the Coal PFS with the derived coal price at $32.8/t and I think this is likely to increase by about a fifth to $40/t, with a corresponding profit of $28.6m before deductions. Who would like to bet they used the higher coal price in the Power PFS calcs thus keeping the power profits and NPV conservative? Thinking about the profits, it may all depend on the resulting tax associated with any ‘free carry’ that may be negotiated, but perhaps we should be charging the Power station the most appropriate coal price such that we pay the lowest possible tax. In other words we pay the lowest tax according to the most advantageous tax position for Kibo’s projects, that’s assuming there is a tax difference. For example are we required to pay Royalties? 2. Coal and Funding Unless we are very lucky financially and it can happen, yes we will either have to sell a new issue of shares or dispose of a percentage of the SPV assets and perhaps even give a free carry if we have to, but that's what business is all about. We have always known it was never going to be easy funding a project to the extent of £38m Capex for the Coal element and $640m to $760m for the Power element. All companies reach the stage when they need to realise finances, and to our advantage we currently have, as LC says, robust fundamentals for both coal and power. But first the Integrated Bankable Study needs preparing when the DFS are completed. The current position is that the PDFS report is under review prior to issuing followed shortly thereafter by the MDFS report. The government are more willing to fund developments than they were and are encouraging TANESCO towards building more plant rather than hiring power generation plant, so perhaps there may be news on a partner from this quarter. (They are owned by the Gov. of course and have announced that 49% of the company is to be hived off by a placing.). I also thought that SEPCO, who are the preferred EPC, would be making their presence felt by now, as I am sure they would like to get their hands on this project. The JDA and the circumstances surrounding the arrangement and agreement with SEPCO III is still vague to me and if nothing has changed, then logically they may still have the option of investing in a 15% share in the SPV, or up to 17% as per wording in the RNS, (which later changed to 15%), but the question is, at what price? I think personally they are off the team and will run only as the preferred EPC. They were to fund the PDFS and also all the related work up to FC and I think it was the latter costs that may have eventually caused the change, as it may have been slightly indeterminate and they were to carry the said costs. Now with Tractobel on board they appear to have completed the PDFS on time, so they delivered and SEPCO appeared not to. SEPCO remain as the preferred EPC contractor, for now at least, having been the sole contractor and still a strange decision despite the reason LC gave. However their money is as good as anybody else’s as long as we don’t give the assets away too cheaply. There is a substantial difference between the Coal and Power in terms of the equity funding required. The coal Capex is $38m with a required equity funding of $9.5m at 25%, ($11.4m at 30%). The Power Capex, which is $640m to $760m requires $160m minimum equity funding which is not far off the equity funding of $169.5m (min) needed for the combined Coal and Power integrated project. So the Power swamps the Coal in terms of the Equity Funding required. It certainly looks like an integrated project is on the cards, as consistently that is the terminology used, nevertheless, surely 100% Coal ownership has to be in the mix as a pretty big consideration. The $23.5m profit is not trivial and the Coal is much more manageable with less Capital expenditure and a smaller finance burden. In addition any early coal production, sales and export profits can contribute towards the associated equity funding, regardless of whatever % share Kibo retain in the Power share price assets. Kibo paid good money for the coal element and own it outright, so why should they not keep if it is a possible, but if they can’t, it obviously provides an important leverage in any negotiations on asset distribution for the projects. The coal is more or less completely de-risked once the MDFS is completed and this has to have some significance eventually with the SP, as does the Power DFS, which is imminent and must eventually produce the lion’s share of profits. However any significant share price movement may not materialise until we move from’ Financial Ready’ along the process of Financial closure to end at the ‘Construction Ready’ milestone in Q1 of 2017. Thereafter the fun should really start as Kibo should have all the necessary studies completed along with the respective EIAs and all permits and licenses in place with a recognised and agreed tariff with Tanesco and the regulator and with all Financial aspects ready for the implementation of the next phase. Surely there will be commercial off-take agreements to be discussed and negotiated along the way and also by then we may know if the coal to liquid gas is a practical and viable proposition. On coal funding, as outlined in the RNS 12 Oct 2015 RNS, LC refers to the option of ‘Project Level Loan Financing’ regarding the coal, which would be at LIBOR + 5%. From Para 3 and 4, LC’s quote in the RNS said: “This is a large-scale project which is now demonstrably lower risk. With the relatively low capital investment required, the Mbeya coal mine delivers a high project IRR and short payback period. 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”. …..Para ends. So on the basis of that RNS statement does this constitute the arrangement of a loan to allow the Coal development and early coal production to get underway? I understand this type of loan is not unique and I interpret this as a loan that is dependent on the project’s generated cash flow for repayment, thus in reality we start to pay back the loan, both debt and equity, only when we are generating revenue. Assumes of course that the project’s assets, rights and interests will be held as secondary security or collateral, but not too sure on the finer details of how all of this works. Once we start talking about non-recourse lending, which I think is common place in project finance, and limited recourse lending these are pretty specialised to me, and there are probably sheets of documentation and legalities and covenants surrounding the necessary agreement to be addressed and drawn up for discussion and signing. An interesting link was posted by Patch on LSE re PPA on 26 March. https://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&;cd=4&cad=rja&uact=8&ved=0ahUKEwjVk6nS0t7LAhWFzRQKHaysCLEQFggyMAM&url=http%3A%2F%2Fcldp.doc.gov%2Fsites%2Fdefault%2Ffiles%2FUnderstanding_Power_Purchase_Agreements.pdf&usg=AFQjCNHctsruQv0vgxYvSPS8UTw7cuCWAQ&sig2=Jxge5fmUSPE_G5td2ZxrIA As Standard Bank have been involved at an early stage, the various options on financing the projects will have been discussed well in advance and the necessary financial modelling will have produced by now a selection of optimum alternative financial models which are attractive, workable and acceptable to Kibo and all concerned. I’m sure they will know their preferred ‘best ‘option by now. Further final modelling will probably take place and the funding will of course take time to be negotiated as it is a major deal of some significance and will be instrumental and a pivotal point in deciding the Projects future. The process will no doubt encompass examination of the tariff rates to ensure that Kibo are adequately funded and can redeem the payback in the requisite timescales. The final tariff outcome therefore may be subject to amendment by the lender(s) of finance if deemed necessary. Coal without any need for massive investment yields $23.5m profit on its own, albeit EBIT and as per RNS any loan is at LIBOR + 5%, which must be more attractive than any large investor requiring a 15% to 20% return on their capital employed. It would not be a surprise if the Government are in the frame taking perhaps a 15% to 30% investment share of the assets. But will they get a free carry on any of this? So owning 100% of the coal and taking one year to produce coal, (probably less as we can spade this off the surface), we have no payback that year and assuming the same rate as the PS feed, if through coal/ export sales, we generate revenue of $23.5m/year for two years, this has the capability of reducing the power equity funding requirement. So after paying the relevant taxes and loan payback amount which will be agreed upfront, we have a contribution to reducing the Equity Funding requirement. A sum of $20m over 2 years would cover 12% of the SPV assets. I have covered selling Imweru previously and at 10p a share this gives us about $50million and will fund about 30% of the MCPP equity requirement ($169.5m at 25%). It may not be the way it all pans out, but simply selling Imweru would set us up with a 30% minimum stake in the SPV with the remainder available for disposal. This and the coal sales would take it to 42% of the assets, with assets to sell. The edited post 36518 attempts to show what asset percentage we retain at a number of share prices. So if this loan facility is available even if only for the coal, why would LC sell off shares cheap? Not when he more than anybody else knows what Kibo is worth. Considering that ‘Project Level Loan Financing’ might have been available in October, I just wonder what the various options on financial packages are now available on the table. Especially if the final figures improve with an upside in the fundamentals, as it may open other doors for accessing competitive finance From the recent RNS, Kibo are still due to issue the Power DFS figures first, although I was under the impression the Coal would be more advanced, so perhaps all the finer details on the PPA electricity tariff and permitting etc are more or less settled, although not signed. However they all need finalisation and signing and may be subject to authorisation by the lenders of the finance. It all takes time and will take as long as it takes despite any drawn up timelines. Perhaps issuing the PDFS first is to accelerate and implement the loan funding discussion process, as it may take longer to negotiate considering the large debt funding required. So the question is with the progression of events and the news flow to come; - will there be integrated twin projects of Coal and Power or - will the projects be split into separate entities/companies or - will Kibo retain 100% coal ownership and retain a share of the Power SPV assets or - will Kibo will retain 100% of the coal element only and sell off the Power element or - will they sell off the whole MCPP and concentrate on other projects, if the price is right and do we get a vote Re the last two, I’ll bet SEPCO would love to get their hands on this project now, they appear to be into everything and I would still like to know exactly what transpired with SEPCO and a nice question for LC at the next meeting. Just think what the MCPP twin project will be worth if it was sold. Who would argue against selling off the Power element if the price is right and on the positive side, perhaps it may deliver an attractive return to shareholders and also eliminate any money worries regarding the development of the other four alive and active projects. Surely given the financial returns predicted they will keep the Coal element. Intriguing prospects ahead and it may all be down to how the final figures pan out and what we are worth, asset wise. Exciting times ahead. 3. The Special Mining Licence (SML) or Mining Licence (ML) issue I was most encouraged by the reference in the presentation slide 23 to the following, “Securing a strategic partner in the near term and completing Feasibility Studies to drive Mbeya Coal to Power into coal mining, electricity production and significant revenue generation by 2018”. This reference to a partner however was also included in the August presentation so partnering is not a new prospect. It is however sensible as it is an enormous responsibility for Kibo to develop these projects alone. So we may have early coal production on the cards and the question of a strategic partner of course may be construed as the Government and Tanesco and they could do a lot worse than having the Gov. involved and perhaps worth surrendering a percentage share in a free carry, if it was appropriate. What are the chances of SEPCO and Tractobel climbing aboard? Re the latter I think that coal may be off their agenda these days, but they are obviously happy doing coal related work at this point in time. Impressed that they were on time, considering they started later o the PDFS. So do we qualify for a SML or a ML. According to the Kibo web site, hxxp://kibomining.com/about-us/about-tanzania/ from the section headed; ‘Holding of mineral rights by foreign companies in Tanzania’, a SML is only required for projects over a Capex of $100m and the SML will be the subject of a comprehensive Mining Development Agreement with the Government and will be accompanied by negotiation of a free carried interest by the state. (See also the Development Agreement in The Mining Act 2010, Section 10, page 17). Now it depends on how you view this interpretation of the mining rules. a) If they adhere to the wording for a SML, then as we only have a requirement for a $38m Capex Coal project, possibly they will issue the mining licence option and it lasts for 10 years before renewal. So on the plus side, with no free carry to the Gov., we save a possible 15% of the project assets, (assuming that is the order of any free carry interest) and the same percentage of savings on the coal profit, currently at $23.5m/year (EBIT). In addition it adds weight to retaining 100% of the coal element if it is affordable and manageable and in addition no royalty is payable. Investigations into the coal to gas (CTG) conversion technology is on-going and if this was feasible and implemented through a dedicated mine, this may take the Capex above $100m threshold, however we then have to find the money. It may depend on how badly the Gov want a free carry and what we get in return by way of agreement. An approach may be to value, on paper at least, the Capex expenditure for the total potential of the coal project with no real intention of implementing the CTG plant and the Gov get their free carry. Not sure if they can just take one regardless of the circumstances. Doubling on the expense of two coal fields might do it, but we then need to find this increased Capex, or treat it as an on-paper exercise. b) On the other hand if we are an integrated project, the Government may bend the rules somewhat and consider Kibo as a single entity with a joint Coal and Power Capex well above $100m and so we qualify for a SML and they negotiate a free carry on that basis. Perhaps unethical. So on the face of it, we may be giving away a 15% for free (assumed), however perhaps this may be offset to a certain extent, by: i) Negotiations on an agreement to reduce taxes for Kibo on both Coal and Power elements and ii) The unlimited access to the governments and TANESCO’s expertise in power generation. As a consequence of any uptake of assets by the Gov /TANESCO, there will be less assets to offer up for disposal and indeed Gov / T may be interested in investing over and above any free carry share. iii) Furthermore with part ownership, the Gov/T may be more amenable to a higher tariff. So yes a free carry for the Gov / T costs us, but in the best interest for Kibo, who will have limited experience re Power projects it makes sense to engage with and have the Gov as a venture partner whether it be just with the free carry or otherwise. Their association with the project provides the added benefit of their knowledge, expertise and operations framework base to draw on over the course of the project. This may prove immensely invaluable, leading to considerable savings both in time and money during the design construction and subsequent operation of the coal and power plant. Also as they would be involved from day one, it would be to their advantage politically to accelerate the design and construction programme ahead of schedule towards completion. In a similar vein, with the bulk of the plant we need an EPC contractor that has been down that road and is well acquainted with the power industry and has the relevant expertise across the whole range of the design procurement and construction processes. No doubt there will be a wealth of these companies out there prepared to bid for the EPC contracts, albeit SEPCO were previously announced as the ‘preferred EPC contractor’ after the PDFS false start. So with the Gov / T on board this will provide Kibo with a robust platform to allow rapid progress from here on in. But we will still have to raise the equity funding. Perhaps this is why they are now referring to power gen by 2018 in the presentation (slide 23) or is this another mistake as in the recent Sharepicker podcast LC spoke about Q1 2019. Just a thought perhaps SEPCO may be interested in purchasing the 49% of TANESCO to be placed and that way they are directly involved in the power generation throughout Tanzania. They appear to have the necessary funding and I wonder how much this would cost. I also wonder if the Gov / TANESCO would be interested in investing in the Coal element and the Power element if they were separate entities and if so to what extent? 4. Coal Resource Size and Grading To supply the power station, the coal feed is 1.48mt per year which is 41.4mt over the 28 years and even allowing for a 30% reserve, which the banks may prefer, this is 54mt, which is less than half of the current resource of 120mt, which has now increased from 109mt. (See re-classification RNS below). So even with this allowance we can easily double the power generation to 2 X 300MW phases without further coal field extension and delineation. They appear confident that there is excellent potential that the coal resource can be extended to 400mt which is adequate to supply 6 phases, (being safe), or possibly 8 phases of 300MW generation plant. In addition to the 48km strike length, of which only 12km have been delineated and stated as a NI 43-101 compliant resource, the RNS on 13 Jan 2016 indicates that there are 3 new PLs namely, PL 10744/2015, PL 10742/2015 and 10743/2015 located immediately north, south and east respectively of the current development area thus consolidating the Company’s ground position on the boundaries. These will further enhance the BFS and subsequent project development and significantly increase the exploration potential thus enabling a future capacity of 1,000MW. Of course to generate much needed revenue, on the assumption there is a market there, some of the coal may be sold off or exported which makes economic sense, and we also have the coal to liquid technology currently being investigated and this may be adopted in time. Perhaps by the allocation of a dedicated mine for the gasification production process. The resource restatement in 11 April RNS indicates an increase of 10.42% on the previous total Mineral Resources from 109.39mt (April 2012) to 120.793mt with a reclassification of the Coal resources into ‘Measured’, ‘Indicated’ and ‘Inferred’ resources as follows: Resource ….Previous…......Restated….....Change Category…..Resource..…....Resource.....(+ or -) ……..………... ..mt..............mt............mt Measured…...…0.............20.904….......+20.904 Indicated…..71.34..........88.601........+17.261 Inferred.....38.05.........11.280….......-26.770 Total.......109.39........120.790........+11.400 The above reclassification provides an increase in the quality and confidence level of the Mineral Resource and the Measured and Indicated combined level of 91% of the restated resource provides a critical input to the ultimate reserve statement of the Mining DFS currently underway. The Final Raw Quality attributes of the coal are also within specification for power plant design. Louis Coetzee, CEO of Kibo Mining, said: "The restated Mbeya coal resource is a further example of the MCPP feasibility study exceeding our expectations. The work undertaken was primarily aimed at improving confidence levels in the resource, to enable the MDFS to state an appropriate coal reserve. This objective was exceeded, with 91% of the total resource now in the Measured and Indicated categories. An unexpected 10.4% increase in the overall resource was also delivered. The restated Mbeya coal resource also provides comfort that the mine will have sufficient reserve capacity, subject to viable MDFS results, to satisfy the energy needs for potential future expansions of the MCPP". Restatement of the Mbeya coal resource is a critical activity in the MDFS work programme and completion means the MDFS can remain on schedule. 5. Royalties and Taxes The following information on the Royalties and Taxes is from the 12/8/2015 RNS on the Mbeya MDFS. "Discounted Cash Flow Modelling: Minxcon's in-house DCF model was employed to illustrate the NPV for the operation in real terms. The NPV is derived from POST-royalties (Note: No royalties are payable on strategic minerals in Tanzania and coal is deemed to be a strategic mineral in Tanzania) and tax, post-debt real cash flows, using the techno-economic parameters, commodity price and macro-economic projections." So as coal is deemed to be a strategic mineral, there are NO ROYALTIES payable on the coal, which is good news for the profits. This probably saves about 4% or about $1m on the coal profit and any potential profit should not be overlooked. Also the Minxcom NPV figures in the PFS report appear to be after TAXES which is an added bonus. Regarding taxes, any free carry, official or otherwise, may be negotiated of course to allow for a reduction in company taxes and royalties, obviously this will depend on the final figures and may be one factor in the decision to integrate the projects or not. Assuming there is a market and an adequate coal resource, then surely most coal and mine mouth power station projects will consider commencing early coal extraction, resources permitting. I think the early coal sales could be the way forward and have referred to this in past posts and in the SPV asset sell post made an attempt to reduce the required equity using early coal sales, thereby reducing the asset disposal. In addition it is shorter term and less costly to implement and provides revenue to extend exploration and define other resources as well as contribute to equity funds. It all depends on what is commercially the best option and this will be apparent once all the profits and NPV etc are released. I would opt for retaining 100% of the Coal element and a share of the Power element and move towards the integrated project only if: -The final power tariff and in particular the profit margin is exceptionally generous. -The notion or the threat of going it alone on the coal project provides the necessary leverage such that we extract an absolutely stunning financial package on the project funding thus enhancing the start of the next phase. -The integrated project with a SML requires a ‘free carry’ to be negotiated and this being the case, they negotiate an agreement to offset this ‘free carry’ to a certain extent, by a reducing the Company taxes on both power and coal. However it would appear either way that regardless of how we develop, LC has said it will be whatever makes the best commercial sense and hopefully it is indeed advantageous for all invested here not just the traders. Power element follows.
30/3/2016
15:42
12bn: Here is the relevant RNS.ibo Mining Plc 02 March 2016 Kibo Mining Plc (Incorporated in Ireland) (Registration Number: 451931) (External registration number: 2011/007371/10) Share code on the JSE Limited: KBO Share code on the AIM: KIBO ISIN:IE00B97C0C31 ("Kibo" or "the Company") 02 March 2016 Kibo Mining Agrees Unsecured, Interest Free Loan Facility of GBP1, 500,000 Ensuring Adequate Funding Security In The Medium Term Kibo Mining plc ("Kibo" or the "Company") (AIM: KIBO; AltX: KBO), the Tanzania focused mineral exploration and development Company is pleased to announce it has today entered into a loan facility (the "Facility") with Sanderson Capital Partners Limited ("Sanderson") for an amount up to GBP1,500,000 to be utilised by Kibo, at its sole discretion and election, for contingency funding, during the term of the Facility. The Facility comprises the following: -- An unsecured, interest free, fixed term loan due for repayment no later than 31 August 2016; -- The loan can be drawn down in five GBP300,000 tranches no less than 40 days apart, with tranches three, four and five subject to successfully achieving certain specified project deliverables; -- A fee of up 7 million Ordinary Shares in Kibo, capped by a maximum value of GBP350,000 associated with the arrangement and implementation of the Facility, will become payable if the Facility is utilised (the "Arrangement Fee"); -- The Arrangement Fee will be payable on the day the Facility is activated by Kibo; -- In addition to the Arrangement Fee, a drawdown fee of GBP51,000 is payable to Sanderson in respect of each of the five GBP300,000 drawdown tranches; -- Each drawdown fee will be payable in 1,186,046 Ordinary Shares in Kibo, subject to certain share price limits, on or before any particular drawdown date; -- At the completion of the term of the loan, Kibo will have the option to settle the first GBP750,000 of the monies borrowed in either cash or Ordinary Shares in Kibo; -- Should Kibo be unable to settle the second GBP750,000 of monies borrowed in cash it will have the option to settle this portion in Ordinary Shares in Kibo; and -- In the event where the loan or any part thereof is settled in shares, the price at which such Ordinary Shares will be issued will be the 30 day VWAP for Kibo Ordinary Shares that traded during the 30 days preceding the settlement date. Additional to the fees payable to Sanderson in the event of utilising the Facility, Kibo is also obliged to pay a 5% corporate advisory fee to the Company's broker, Beaufort Securities Limited. The amount off GBP75,000 will be payable in Ordinary Shares in Kibo at the same time as the Arrangement Fee becomes due and will be issued at a price equal to the prevailing market price for Kibo Ordinary Shares. Louis Coetzee, CEO of Kibo Mining commented today: "The MCPP is progressing at an expeditious pace. We are now only a few months away from expected completion of the Definitive Feasibility Studies for both the mining and power elements of the MCPP and at an advanced stage with the MCPP commercial arrangements and agreements. Notably, Kibo has also retained 100% ownership of the MCPP and has cultivated growing support and interest from the Tanzanian Government and other strategic stakeholders. Sustaining and maintaining this momentum is crucial to successfully expediting the completion of the final MCPP development phase, with funding certainty and stability over the next six months a key factor in this. To this end, Kibo has secured a funding instrument for the Company that: -- Provides adequate funding security in the medium term while retaining the flexibility to freely investigate additional or substitute funding alternatives; -- Is considered to be competitive vis a vis other funding options currently on offer and accessible to Kibo, given the prevailing market conditions; -- Provides the transparency and flexibility for the Company to effectively manage its cash position upon repayment of the Loan facility; and -- Does not incorporate hidden, cumulative or progressive cost elements. With this funding in place, we can focus our attention on an exciting six months ahead to prove and deliver the MCPP as a project with solid, robust bankable credentials." Contacts
24/3/2016
07:59
12bn: LSE:KIBO OKSearch Kibo Mining Share News (KIBO) Follow KIBO Start Trading 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% 3.50p 3.25p 3.75p - - - 0 07:30:09 Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m) Mining 0.0 2.1 1.0 3.5 12.25 Print Alert Kibo Mining Plc Company Presentation & Web Integrated Timeline 24/03/2016 7:01am RNS Non-Regulatory TIDMKIBO Kibo Mining Plc 24 March 2016 Kibo Mining Plc (Incorporated in Ireland) (Registration Number: 451931) (External registration number: 2011/007371/10) Share code on the JSE Limited: KBO Share code on the AIM: KIBO ISIN:IE00B97C0C31 ("Kibo" or "the Company") 24 March 2016 Updated Company Presentation and Web integration of MCPP Process Graphic Kibo Mining plc ("Kibo" or the "Company") (AIM: KIBO; AltX: KBO), the Tanzania focused mineral exploration and development company is pleased to inform shareholders that it has uploaded an updated company presentation to its website. It has now also fully web integrated its previously announced interactive process description and timeline for the Mbeya Coal to Power Project ("MCPP") to make it more user-friendly for navigation. Both the Company Presentation and the MCPP Timeline & Description can be accessed under Key Documents on the Company's website or by selecting the links shown. Contacts +27 (0) 83 2606126 Kibo Mining Chief Executive Officer Louis Coetzee plc -------------------- ------------------- -------------------- ------------------------ Andreas Lianos +27 (0) 83 4408365 River Group Corporate Adviser and Designated Adviser on JSE -------------------- ------------------- -------------------- ------------------------ Jon Belliss +44 (0) 207 382 Beaufort Securities Broker 8300 Limited -------------------- ------------------- -------------------- ------------------------ Oliver Morse +61 8 9480 2500 RFC Ambrian Nominated Adviser Limited on AIM -------------------- ------------------- -------------------- ------------------------ Bell Pottinger Investor and Media Daniel Thöle +44 (0) 203 772 Relations / Anna Legge 2500 -------------------- ------------------- -------------------- ------------------------ Kibo Mining - Notes to editors Kibo Mining is listed on the AIM market in London and the AltX in Johannesburg. The Company is focused on exploration and development of mineral projects in Tanzania, and controls one of Tanzania's largest mineral right portfolios. Tanzania provides a secure and stable operating environment for the mineral resource industry and Kibo Mining therein. Kibo Mining holds a thermal coal deposit at Rukwa, which has a significant JORC compliant defined resource (See Table 1 below), and is developing a 250-350MW mouth-of-mine thermal power station, the Mbeya Coal to Power Project ("MCPP"), previously called Rukwa Coal to Power Project ("RCPP"), with an established management team that includes Standard Bank as Financial Advisor. Kibo is undertaking a Coal Mining Definitive Feasibility Study and a Power Pre-Feasibility Study for the Mbeya project with an integrated Coal-Power interim study report to be released in the near term. On 20(th) April 2015, Kibo signed a Joint Development Agreement for the completion of the Definitive Feasibility Studies and development of the MCPP with China based EPC contractor SEPCO III. The Company also has extensive gold focused interests including Lake Victoria Goldfields and Morogoro projects. At Lake Victoria, the Company has projects with a 550,000oz JORC compliant gold Mineral Resource at Imweru Project (See Table 2 below) and a 168,000oz NI 43-101 compliant gold Mineral Resource at the Lubando Project (See Table 3 below) in which the Company holds a 90% attributable interest. The Company is currently undertaking a Definitive Feasibility Study on its Imweru Project. Kibo also holds the Haneti Project on which the latest technical report confirms prospectivity for nickel, PGMs, gold and strategic metals including lithium. Kibo Mining further holds the Pinewood (coal & uranium) project where the company has entered into a 50/50 Exploration Joint Venture with Metal Tiger plc. Finally, the Company also holds the Morogoro (gold) project where the company has also entered into a 50/50 Exploration Joint Venture with Metal Tiger plc. The Company's projects are located in the established and gold prolific Lake Victoria Goldfields, the emerging goldfields of eastern Tanzania and the Mtwara Corridor in southern Tanzania where the Government has prioritised infrastructural development attracting significant recent investment in coal and uranium. The Company has a positive working relationship with the Tanzanian government at local, regional and national levels and works hard to maintain positive relationships with all communities where company interests are held. The Company recognises the potential to enhance the quality of life and opportunity for Tanzanian citizens through careful development of its projects. Updates on the Company's activities are regularly posted on its website www.kibomining.com Johannesburg 24 March 2016 Corporate and Designated Adviser River Group This information is provided by RNS The company news service from the London Stock Exchange END
02/3/2016
12:31
mrkeysersoze: News out. Mr K. 02/03/2016 12:30pm UK Regulatory (RNS & others) Kibo Mining (LSE:KIBO) Intraday Stock Chart Today : Wednesday 2 March 2016 Click Here for more Kibo Mining Charts. TIDMKIBO RNS Number : 8000Q Kibo Mining Plc 02 March 2016 Kibo Mining Plc (Incorporated in Ireland) (Registration Number: 451931) (External registration number: 2011/007371/10) Share code on the JSE Limited: KBO Share code on the AIM: KIBO ISIN:IE00B97C0C31 ("Kibo" or "the Company") 02 March 2016 Kibo Mining Agrees Unsecured, Interest Free Loan Facility of GBP1, 500,000 Ensuring Adequate Funding Security In The Medium Term Kibo Mining plc ("Kibo" or the "Company") (AIM: KIBO; AltX: KBO), the Tanzania focused mineral exploration and development Company is pleased to announce it has today entered into a loan facility (the "Facility") with Sanderson Capital Partners Limited ("Sanderson") for an amount up to GBP1,500,000 to be utilised by Kibo, at its sole discretion and election, for contingency funding, during the term of the Facility. The Facility comprises the following: -- An unsecured, interest free, fixed term loan due for repayment no later than 31 August 2016; -- The loan can be drawn down in five GBP300,000 tranches no less than 40 days apart, with tranches three, four and five subject to successfully achieving certain specified project deliverables; -- A fee of up 7 million Ordinary Shares in Kibo, capped by a maximum value of GBP350,000 associated with the arrangement and implementation of the Facility, will become payable if the Facility is utilised (the "Arrangement Fee"); -- The Arrangement Fee will be payable on the day the Facility is activated by Kibo; -- In addition to the Arrangement Fee, a drawdown fee of GBP51,000 is payable to Sanderson in respect of each of the five GBP300,000 drawdown tranches; -- Each drawdown fee will be payable in 1,186,046 Ordinary Shares in Kibo, subject to certain share price limits, on or before any particular drawdown date; -- At the completion of the term of the loan, Kibo will have the option to settle the first GBP750,000 of the monies borrowed in either cash or Ordinary Shares in Kibo; -- Should Kibo be unable to settle the second GBP750,000 of monies borrowed in cash it will have the option to settle this portion in Ordinary Shares in Kibo; and -- In the event where the loan or any part thereof is settled in shares, the price at which such Ordinary Shares will be issued will be the 30 day VWAP for Kibo Ordinary Shares that traded during the 30 days preceding the settlement date. Additional to the fees payable to Sanderson in the event of utilising the Facility, Kibo is also obliged to pay a 5% corporate advisory fee to the Company's broker, Beaufort Securities Limited. The amount off GBP75,000 will be payable in Ordinary Shares in Kibo at the same time as the Arrangement Fee becomes due and will be issued at a price equal to the prevailing market price for Kibo Ordinary Shares. Louis Coetzee, CEO of Kibo Mining commented today: "The MCPP is progressing at an expeditious pace. We are now only a few months away from expected completion of the Definitive Feasibility Studies for both the mining and power elements of the MCPP and at an advanced stage with the MCPP commercial arrangements and agreements. Notably, Kibo has also retained 100% ownership of the MCPP and has cultivated growing support and interest from the Tanzanian Government and other strategic stakeholders. Sustaining and maintaining this momentum is crucial to successfully expediting the completion of the final MCPP development phase, with funding certainty and stability over the next six months a key factor in this. To this end, Kibo has secured a funding instrument for the Company that: -- Provides adequate funding security in the medium term while retaining the flexibility to freely investigate additional or substitute funding alternatives; -- Is considered to be competitive vis a vis other funding options currently on offer and accessible to Kibo, given the prevailing market conditions; -- Provides the transparency and flexibility for the Company to effectively manage its cash position upon repayment of the Loan facility; and -- Does not incorporate hidden, cumulative or progressive cost elements. With this funding in place, we can focus our attention on an exciting six months ahead to prove and deliver the MCPP as a project with solid, robust bankable credentials."
02/2/2016
11:04
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
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