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October 2015
MODERN MINING
39
COAL MINING
feature
of optimal gearing was tested on the surface
miner contractor option, one of four alterna-
tive options for project development examined
in the PFS. One of the key conclusions result-
ing is that the all-in cost margin ranges from
47,9 % to 48,1 %. Applying this margin, Kibo
interprets that annual earnings before interest
and tax (EBIT) of between US$23,5 million and
US$23,6 million will be generated.
The high all-in cost margin reflects low oper-
ating costs as a result of the proposed mining
method and shallow orebody, small sustain-
ing capital expenditure and a fixed coal price
as received from the power plant and is – says
Kibo – a key indicator of the robustness of the
project.
Applying a real discount rate of 5,51 %, the
best estimated NPV of free cash flow to equity
ranges between US$214 million and US$219
million while the equity IRR (leveraged) ranges
between 131 % and 146 %, with a project IRR
of 54 %. The cash return on capital invested
ranges between 726 % and 732 % while the
project payback period before loan repayment
is estimated at 2,6 years.
“We are delighted to provide this update
showing the outcome of the latest, more
detailed work undertaken by our advisers for
the MCPP,” comments Louis Coetzee, CEO of
Kibo Mining. “In particular, we are delighted
with the confirmation of the NPV range of
US$214 million to US$219 million which is
solely in respect of the coal mining component
and does not include the significantly larger
power generation portion of the project.
“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 con-
sider 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.
“As each stage of our work on the MCPP is
completed, Kibo emerges with a stronger, more
valuable project. We will update shareholders
with further progress in the near-term in what
is a busy operational period for the Kibo team
and the MCPP.”
“This is a large-
scale project
which is now
demonstrably
lower risk.”
Louis Coetzee,
Kibo Mining