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Kibo Mining PLC: THE INVESTMENT CASE

Kibo Mining's attractions more visible following Katoro listing

Beaufort Securities estimates Katoro’s risk-adjusted equity value at £12.7mln or 11.7p per share
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INVESTMENT OVERVIEW: KIBO The Big Picture
Work has now started at Katoro

Kibo Mining PLC (LON:KIBO) will hope that it has cleared the picture a little for investors following the spinning out of its gold assets into a separate company.

Katoro, as the business is now called, was undoubtedly a little overshadowed by other parts of Kibo’s operations, notably its Mbeya coal mine/power station project in Tanzania.

And while Kibo is still the majority owner in Katoro, the move does give investors who are interested in the gold side their own vehicle.

Coal and power at Mbeya

At Mbeya, Kibo announced in March that the strategy will now be to develop the mine to produce coal for the Mbeya power plant, its primary client, and for the domestic coal market, its secondary client.

The decision to adopt a diversified production strategy follows an integrated bankable feasibility study on Mbeya (MCPP).

The study investigated alternative commercial opportunities other than producing coal specifically for the power plant.

It found there were sufficient additional coal resources at Mbeya to expand the power station to more than double the existing design size and plant life.

Revenues over the 25 year life of the project were forecast at between US$7.5-8.5bn, while returns on the project were between 14.7% and 16% after tax.

“An integrated consideration of all these aspects shows that a diversified production strategy is indeed feasible and has potential to significantly enhance the economics of the Mbeya coal mine and which could allow the mine to be put into production earlier than planned for the MCPP,” said Kibo chief executive Louis Coetzee.

Kibo plans to produce between 250 to 350 megawatts (Mw) from the mouth-of-mine thermal power station but it has the capacity to rise to 600Mw in the second phase. 

Significant Tanzanian mining footprint

Meanwhile, the listing of its Imweru and Lubando gold mining assets in Tanzania as Katoro (LON:KAT) took effect on 23 May.

A reverse takeover of Opera Investments was the method for the deal with the name change from Kibo Gold to reflect the new business focus.

Kibo still owns 56% of Katoro and with its board to comprise Louis Coetzee as executive chairman and Myles Campion, Paul Dudley and Tinus Maree as non-executive directors, Kibo is still going to be setting the agenda in the short-term at least.

Development work starts ahead of schedule at Imweru

Development work on the Imweru gold project in Tanzania has also started, Kibo noted at the end of May. Operational teams have been deployed on site ahead of the arrival of the first drill rig.

"We are extremely pleased with the successful and rapid start of work on the Imweru project. As a result, we are now two months ahead of our previous work programme schedule, which initially indicated that drilling would commence in Q3 2017,” said Coetzee.

“With this, the capability and capacity of the project team who are responsible for executing the Imweru work programme, is also clearly demonstrated," Coetzee added.

What the house says

Beaufort Securities estimates Katoro’s risk-adjusted equity value at £12.7mln or 11.7p per share based on the compliant resource estimate of 755,000 oz of gold.

Through its listing Katoro raised gross proceeds of £1.5mln, which it will use for additional drilling and a pre-feasibility study as well as applying for a mining licence before the end of 2017.

“Whilst the Lake Victoria Goldfields region is now considered to be mature from a gold exploration perspective, we believe there is still potential for significant new discoveries, albeit at greater depths, with additional examples of lower grade stockwork as well as disseminated deposits that may have been overlooked during earlier stages of exploration,” said Beaufort.

Katoro is valued at around £5.7mln at 5p, with Kibo worth £19mln at 5.05p. 

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