TIDMEDL
RNS Number : 0865W
Edenville Energy PLC
16 August 2022
16 August 2022
Edenville Energy Plc
("Edenville" or the "Company")
New Coal Mining Agreement
Business update
Edenville is pleased to announce that it has signed an agreement
("Agreement") with Brahma Energies Limited ("Brahma"), commencing
immediately, to secure production and sales of a minimum of 4,000
tonnes of washed coal per month at the Company's Rukwa Coal Project
("Rukwa") in Tanzania, potentially rising to a minimum 6,000 tonnes
after 2 months, based on the assumptions set out below .
Brahma are a local mine operator and commercial and logistics
specialist having up to 70 transport vehicles on the roads of
Tanzania. Their team is experienced in all aspects of operations,
mine management and coal commercial sales. They bring with them an
offtake which will enable Edenville to sell all of its production
of washed coal to parties introduced by Brahma. The agreement with
Brahma is for 12 months initially and can be extended by mutual
agreement.
Economics of the Agreement
Under the Agreement, Brahma will take on full day to day
operational management and control of the Rukwa mine, including all
operational costs, with ultimate oversight continuing to be
provided by Edenville. Given local demand, sales are currently
expected to take place to customers in Tanzania and adjoining
neighbouring countries. As a result, the net target sales price for
Rukwa coal delivered at the gate of the mine is currently estimated
to be between $35-$50 per washed tonne. The revenue share
arrangements under the Agreement give Edenville $10 per tonne of
washed coal sold at the minimum price of $35 per tonne, plus 60% of
any sales revenue above $35 per tonne of washed coal ("profit
share"). Brahma shall be responsible for the collection of any
taxes and royalties from coal sales after month 2.
Accordingly, the Brahma operational team is motivated to ensure
maximum output, sales volume and sales price are achieved, leading
to an efficient running of the mine as a result. Edenville
management will work closely with the operator on any proposed
sales contracts.
Edenville will continue to manage and fund operational costs
from its existing cash resources during the first two months of the
Agreement, following which the Company expects Rukwa to become
cashflow positive on an ongoing basis. Edenville, at its sole
discretion, can also deploy additional capital to expedite
production ramp up; any such capital deployed is to be repaid to
Edenville before any profit share is paid. Brahma's commitment to
production of 4,000 tonnes per month is contingent on plant being
in working order and any commitment above 4,000 tonnes per month is
contingent on further plant improvements.
Operational Review
Following a visit to Rukwa and an analysis of the operation, the
newly appointed management of Edenville have concluded the mine
would benefit from greater oversight and management on the ground
at Rukwa, to meaningfully build on the very low and sporadic
historical production and sales, and to allow Rukwa to achieve its
potential.
At present, the Rukwa wash plant, which has an input capacity of
100 tonnes per hour, is yielding approximately 35 tonnes of washed
coal an hour of output. There is scope to increase this yield
following the completion of ongoing repairs. Management will update
the market once any improvements have been made.
Based on its initial analysis and following consultation with
Brahma since their appointment on 3 August 2022, Edenville believes
that an initial 4,000 tonnes per month of washed coal can be
achieved from the wash plant by mid-September 2022 following the
completion of ongoing works on the wash plant. A further increase
to 6,000 tonnes per month of washed coal will then be targeted,
albeit following additional maintenance and repairs to existing
infrastructure and/or deployment of further equipment. This output
could be increased still further with longer or double shifts
and/or by adding additional working days. However, the Company is
pursuing a conservative approach to increase production steadily
from these initial levels until such time operational capacity of
both staff and existing machinery is better understood. The Company
will be monitoring progress and looking at ways to further improve
output above the target of 4,000-6,000 tonnes per month.
The current 'at gate' sales price range of $35-50 per tonne from
Rukwa is low in comparison to international coal prices. However,
this is before transportation costs, which are high given the
remoteness of Rukwa. It also reflects the royalty regime within
Tanzania, which includes the transport costs in its calculation. To
achieve international coal prices the mine would need both large,
consistent production and sales quantities (something Rukwa has not
yet provided) and reasonable access to international ports via road
or rail infrastructure. Therefore, sales of Rukwa coal are
currently focused on the local markets, particularly cement
companies who require coal as part of their production process. It
should be noted that regional coal prices have still risen over the
last year and there is potential for further increases in the event
the global demand for coal continues. Establishing a reliable
source of washed coal at Rukwa is also expected to strengthen the
Company's position on any further offtake negotiations.
Noel Lyons, CEO of Edenville, commented:
"I am pleased to be announcing this agreement with Brahma.
Unlike previous agreements, this contract does not cap the
Edenville upside in terms of coal sales price. We have undertaken a
thorough review of the asset and settled on a contracted output and
sales of 4,000 tonnes of washed coal per month, potentially rising
to 6,000 tonnes per month from mid October 2022 for the remainder
of the 12-month contract, based on the success of the
aforementioned development plan.
Brahma have agreed that a stock pile of run of mine coal will be
built up over the coming months to seek to ensure production and
sales of 6,000 tonnes of washed coal per month, even during the
rainy season which can severely curtail access to run of mine. With
a regular supply of washed coal, the Company is optimistic it will
be able to secure attractive market prices for domestic and
regional sales.
The Company will keep the market appraised of progress and
output levels as the ongoing technical audit is completed and plant
repairs and upgrades are carried out."
For further information please contact:
Edenville Energy Plc +44 (0) 20 3934
Noel Lyons - CEO 6630
Strand Hanson Limited
(Financial and Nominated Adviser)
James Harris
Rory Murphy +44 (0) 02 74v09
Richard Johnson 3494
Tavira Securities Limited +44 (0) 20 7100
(Broker) 5100
Oliver Stansfield
Jonathan Evans
IFC Advisory Limited
(Financial PR and IR)
Tim Metcalfe +44 (0) 20 3934
Florence Chandler 6630
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulation (EU) No. 596/2014 as it forms part of
United Kingdom domestic law by virtue of the European Union
(Withdrawal) Act 2018.
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END
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