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Kibo Energy explains rationale behind recent Sanderson transaction

On Tuesday, Sanderson converted its 2.5% minority stake in the Mbeya Coal to Power project in Tanzania into Kibo shares, taking its interest in Kibo up to 23.4%

coal mining
Kibo could look to develop Mbeya as a dedicated coal mine rather than a coal-fired power station

Kibo Energy PLC (LON:KIBO) has explained the rationale behind its recent deal with Sanderson, which saw it issue shares in exchange for the corporate financier’s minority interest in the Mbeya Coal to Power project (MCPP) in Tanzania.

On Tuesday, Kibo issued 126.44mln shares to Sanderson in return for the latter’s 2.5% stake in Mbeya.

READ: Sanderson ups stake in Kibo as it converts minority interest in Mbeya

The transaction valued Mbeya at £66mln – a valuation which Kibo said reflected the “progress made and value added to the MCPP's coal resource since 2016”.

As part of the conversion, Sanderson agreed to provide up to £500,000 of short-term financing, plus up to a further £2.23mln (US$2.94mln) in additional funding.

Because the shares are trading below par value – companies can’t issue shares for below their par value – Kibo has been unable to raise money through an equity placing.

Deal gives Kibo access to money

With few other options on the table, the company said “the certainty and immediate availability” of Sanderson’s money brought with it “considerable value” for shareholders.

“[The Sanderson loan facility] ensures that the company has access to sufficient working capital to continue its operations on its projects even in the very difficult prevailing market conditions and uncertainty that was caused by unforeseen events in Tanzania

“This will enable the company to maintain momentum behind its on-going development work across its African and UK projects while also examining a range of additional funding options.”

Still seeking TANESCO clarification

Kibo’s wide-ranging statement also confirmed that it is still seeking clarification from state-owned power supplier TANESCO, which last month said it would not be buying any of the electricity produced at MCPP.

The news was a blow to Kibo, but the company has insisted that all is not lost and that it could develop MCPP as a dedicated coal mine without the attached power plant.

Should that happen, it would look to supply the coal into the local and regional markets.

Kibo shares edged 1.6% higher to 0.91p on Friday morning.

Quick facts: Kibo Energy PLC

Price: 0.27 GBX

Market: LSE
Market Cap: £3.44 m

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