Kibo Mining PLC (LON:KIBO) could produce its first gold as early as the third quarter of next year, according to chief executive Louis Coetzee.
That’s the key takeaway from the amalgamation of the company’s Imweru gold project in Tanzania with the adjacent Imwelo project, owned by privately-held Lake Victoria Gold Ltd.
The deal, says Coetzee, isn’t just about economies of scale. It’s more about the rapid advance towards viable cash flow.
First the amalgamation of the two projects has to complete, a process which should include the combining of the economic models for the two separate projects into one.
That, says Coetzee, should happen by the end of June.
“At the moment if we combine assets se have a 700,000 ounce resource with plus or minus 100,000 ounces in reserve,” he says. “But conceivably we can reach that one million ounce resource level, subject to further exploration work that has already been defined for the expansion of the resource.”
A million ounces used to be something of a talismanic figure in junior mining, although the magic sheen around the number seems to have worn off in recent years.
Still, it would be an obvious value-add if the company could get there, and would firmly underpin the ultimate planned production target of 100,000 ounces per year.
Initially though, the company is likely to shoot for a lower 50,000 ounce target and ramp up from there.
Precisely what sort of cash flow and margin the newly combined project is likely to deliver isn’t yet clear, but Coetzee reckons he should be in a position to update the market on costs - both capital and operating – by July or August.
So we are not talking a long time here. From that point, a 12 month development timetable means that production could come as early as September 2017, although Coetzee himself is not putting such a precise timetable on it.
In any case, the first gold pour will be a transformative moment for Kibo, marking a transition from speculative explorer to respectable producer that has been slowly and steadily directed by Coetzee over a number of years.
They’ve not always been easy times, and Coetzee is aware that it’s not only Kibo that’s found it hard going in equity markets in recent years. But he’s hopeful that Kibo’s transformation will go some way towards reviving investor faith that Aim is something other than a short-term trading market for punters to come in and out of companies.
Because for Kibo the merger of Imwelo and Imweru is just the start.
If it comes off, the company’s plans for the Mbeya coal and power project, also in Tanzania, will be an even bigger deal.
This project is progressing steadily and, Coetzee is keen to point out, remains on schedule “in terms of key deliverables.”
The company has just invited bids for the engineering and procurement contract, with a potential Chinese funding partner still waiting in the wings.
“We hope to have the integrated bankable feasibility study done by July or August,” says Coetzee.
“As soon as we’ve completed that there’s a bit of preparation work to be done and then we can finally officially start with the financing.”
The idea is to develop the 109 mln tonne coal resource in conjunction with a coal-fired power station.
As it stands, it’s a job that’s likely to be financed by Chinese power specialist SEPCO III, otherwise known as the Shandong Electric Power Construction Corporation, but it’s not a done deal yet.
A joint development agreement is in place, and the partners are due to meet in Brussels in mid-June to finalise arrangements.
Under the terms of that agreement, SEPCO III will need to invest in equity in Mbeya at a project level in order to secure the rights to be the sole bidder for the EPC.
How it will all be financed remains to be seen, but Coetzee is quietly confident the money will be found.
“We’ve been having discussions at a very high level all along,” he says. “Interest at the funding level is getting more and more evident.”