The dual-listed CIC Energy said last week that it was expecting the results on its mining license for coal deposit at Mmamabula project to be out by mid-this year to trigger yet another boom in the northern parts of the country.
The Botswana Stock Exchange and Toronto Stock Exchange listed company said in a statement released from Road Town in the British Virgin Islands that it submitted a mining license request to the Ministry of Minerals in Botswana that would enable it to proceed with its intended mine construction plans.
?Through its wholly-owned Botswana subsidiary, Meepong Resources (Proprietary) Limited, the Company submitted an application for a mining license with respect to Mmamabula to the Ministry of Minerals, Energy, and Water in December, 2006,? the statement said. ?Evaluation of the application is expected to take up to six months.?
Greg Kinross, President and CEO of CIC, said ?We are pleased to confirm that the Project is on track to reach financial close as planned before the end of the current year. Limited capacity in the EPC (Engineering, Procurement and Construction) market, due to current demand for new sources of power both within the region and globally, is a reality for build-out of all new power stations.?
Current EPC market conditions further support CIC?s previous decision to increase the individual unit size at Mmamabula from 600 MW to 800 MW, as the different sized units have approximately equivalent build-out times. Although worldwide EPC costs are on the increase, this will be taken into consideration as PPA negotiations proceed and we do not expect this to have a material impact on Project economics in relation to CIC.?
The total costs of the development and construction of Phase One are currently anticipated to be around US$5.5 billion, plus US$0.3 billion for the construction of related mine infrastructure.
However, limited capacity within the EPC market is placing upward pressure on prices, and it is possible that the final EPC price may increase the overall Project costs.
Of this amount, approximately 20 percent is expected to be contributed by the equity investors and the remaining 80 percent will be provided in the form of limited recourse project debt.
The Company, in conjunction with the planned development partner, International Power plc, has initiated discussions with South African and international lenders and leading Export Credit Agencies, with significant interest being shown in the Project. The engagement includes potential debt financing, structured to optimize the overall economics of the Project.
The Company said it has short listed a select group of multi-national EPC contractors with experience in the design and manufacture of major coal-fired power stations worldwide. A formal EPC tender process for the Phase One 2,100 to 2,460 megawatt (MW) power station was launched in December 2006.
Due to recent increased global demand for the construction of power stations, there is currently limited capacity in the EPC market for the production of long lead time items. Although negotiations with prospective EPC contractors are not yet concluded, the Company believes that commencement of construction of the power generation units could be later than originally anticipated, as a result of factory capacity constraints, and, accordingly, production from Phase One may be pushed back by some six to twelve months.
Mmambula is 120 kilometers from the capital city Gaborone and intends to supply electricity to Botswana and the rest of the region.
It is envisaged that the electrical output from Mmamabula will be sold under approximately 40 year PPAs with Eskom Holdings Limited and Botswana Power Corporation (BPC), respectively. The majority of the power is expected to be sold to Eskom. In September last year, a memoranda of understanding with Eskom and the Government of Botswana was signed, regarding the proposed development of the Project.
Formal PPA negotiations with Eskom commenced in August 2006 and with BPC in November 2006; these negotiations continue to progress. The outcome of these negotiations will be subject to review and due diligence by the legal counsel appointed to represent the project lenders, with the lenders counsel anticipated to be appointed by the end of March 2007.
