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Rame Energy PLC about to power up at Cerro Bayo

Rame Energy PLC about to switch on its 1.8MW wind project to supply power to miner Mandalay Resources Corp's (TSE:MND) Cerro Bayo gold mine....
Rame Energy PLC about to power up at Cerro Bayo
The project is in highly remote location...


Rame Energy PLC (LON:RAME) is about to switch on its 1.8MW wind project to supply power to miner Mandalay Resources Corp's (TSE:MND) Cerro Bayo gold mine in the Patagonia region of Chile under a five year plan.

The Cerro Coihue project, estimated to provide the firm with revenues of more than $400,000 a year, involves three turbines in a very remote location and has been financed in cooperation with German partner, Anden Re.

Construction was completed on March 14 and operational start-up is expected within two weeks.

Rame chief Tim Adams  told investors: "We are delighted to provide an update on the Cerro Coihue project where we have had to develop an innovative technical solution to reduce equipment capital costs in order to provide competitively priced energy against a short term power purchase agreement (PPA).

"While the initial PPA is only for five years, the life of the mine is expected to be significantly more than the initial five years and so we would expect to roll the PPA forward in due course."

The project, he said,  showcases the group's ability to deliver attractive power solutions to diesel dependent off grid customers whilst still being able to support strong financial returns to the asset owners.

When completed, Rame is set to receive  a final contract payment worth over $800,000 and its share of the generating revenue, as an independent power provider, is estimated to be more than $400,000 a year.

Rame has used three 600kW Vestas V44 turbines that were previously used in Denmark. They have been given a complete overhaul in Barcelona given a new control system to improve output and reliability - the first time this has been done.

Rame noted it had repaid the $1.2 million loan used to secure its 25% equity stake in the asset.

Shares in Rame added 3.03% to 8.50p.

House broker Cantor has a target price of  24p on the shares.

It says the firm's progress on the Cerro Colhue off-grid project followed the announced sale of two of its on-grid projects.

"We see these announcements as proving the business model, with larger assets being monetised and smaller assets supporting development," said analyst Adam Forsyth.

"Along with last week’s announcement of service revenue for the Raki and Huajache projects, the fee income here gives us greater confidence that our forecast improvement  in service profitability can be delivered."

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