Rukwa Definitive Mining Feasibility Study

Kibo Mining Plc (Incorporated in Ireland)

(Registration Number: 451931)

(External registration number: 2011/007371/10)

Share code on the JSE Limited: KBO 

Share code on the AIM:KIBO

ISIN:  IE00B97C031

("Kibo" or "the Company")

12 August 2015

Rukwa Definitive Mining Feasibility Study - Phase 2, Stage 1 - Pre-Feasibility Study,

Final Report Findings

Kibo Mining plc ("Kibo" or the "Company") (AIM: KIBO; AltX: KBO), the Tanzania focussed mineral exploration and development company, is pleased to announce the findings from Phase 2, Stage 1,  Mining Pre-Feasibility Study ("MPFS"), of the Company commissioned Definitive Mining Feasibility Study (DMFS), concerning the mining element of the Mbeya Coal to Power Project (MCPP).

Key highlights

-     Selected mining method - modified terrace mining method, with over burden removal by means of a free dig (truck and shovel) method, and coal seam and inter burden mining by means of mechanised continuous surface mining method. 

-     Limited processing in the form of destoning of product required.

-     River diversion as identified in the Concept Study proven unnecessary in Pre - Feasibility Pit Optimization.

-     Four alternative mining options for the selected mining method identified, with the Project financially feasible for all of the options investigated;

-     Annual estimated coal sale revenues of between US$48.4million and US$48.6million;

-     All-in cost margin ranges from 49% to 62%. Applying the aforementioned all-in cost margin, Kibo interprets that an annual profit margin of between US$24 million to $27 million will be generated;

-     Applying a real discount rate of 5.5% the best estimated Net Present Value ranges from US$211million to US$244million.

-     Internal Rate of Return (IRR) ranging between 33.6% and 53.9%

-     Return on Investment (ROI) ranging between 595% and 903%

-     Payback Period ranging between 2.6 - 3.65 years

Louis Coetzee, CEO of Kibo Mining, said: "We are delighted with the results from the MPFS, which have surpassed all expectations. Figures from the MPFS-report confirm that the Mbeya Coal Mine (as the mining component of the MCPP) is a very robust project in every aspect. A comparison with the results and figures announced in our RNS of 08 August 2014, shows that the project fundamentals are significantly better than what we originally believed at the end of the Concept Study. The all-in cost margin is one of the key indicators that measure the overall robustness of the project and the latest range has improved from 38% - 45% to 49% - 62%. This is significantly above the 25% level which is considered "healthy" for this type of project.    

We are also delighted with the new estimated Net Present Value range of US$ 211million to US$ 244 million, with an associated IRR of 34% to 54%.

The All-in Cost Margin and Net Present Value ranges are particularly impressive given the very prudent assumptions applied.  This is evidenced by the use of coal pricing significantly below the current market price, further reflecting the robust economics of this project. This is also reflected in the very strong ROI figures.

In addition to the project's very strong economics the MPFS also delivered decisive results on technical and environmental levels. The continuous surface miner proved to be a viable option, which improved mining efficiency and effectiveness significantly and so did the fact that the overburden could be mined by using "free digging". The most important impact of these two aspects are however not of a technical nature but environmental. The use of the continuous surface miner made any washing of coal unnecessary, whilst "free digging" allows total avoidance of any explosives, i.e. blasting. It is specifically the avoidance of any washing that frees the project of a very expensive and onerous environmental liability. The fact that we also do not have to do any river diversion is a further significant positive environmental impact". 

Important Notes for Readers:

The information contained within this report is taken from the DMFS Phase 2, Stage 1 report produced by Minxcon Projects in respect of the MMCPP. Recognising the level of commercial sensitivity and for the protection of all stakeholders' interests we have limited the technical information that we publish in this report and in the wider public domain at this time. 

Readers must note that operational and financial data pertaining to any complex development project of this nature is project specific. Kibo has undertaken the MCPP DMFS to properly and professionally understand the technical and financial merits of the project. The findings outlined can only be used in an assessment and analysis of the MCPP to which this work relates and not as a generic benchmark standard.

DMFS Phase 2, Stage 1 - Executive Summary Extracts and Commentary

The Definitive Mining Feasibility Study - Mbeya Coal to Power Project:

Minxcon (Pty) Ltd ("Minxcon") was commissioned by Kibo Mining Plc ("Kibo" to compile a Definitive Mining Feasibility Study ("DMFS") on the Mbeya Coal to Power Project ("MCPP" or "Project"). The intended Rukwa Coal Mine is located in south-western Tanzania, approximately 70 km northwest of the regional capital of Mbeya. This Report forms part of the total DMFS which aims to design and plan the establishment and construction of the Rukwa Coal Mine.

DMFS Deliverable:

The main deliverable of Phase 2, Stage 1 of the DMFS, the "Pre-Feasibility Study Report" is a report providing an independent assessment on an order of magnitude level of detail, towards completion of the Definitive Mining Feasibility Study ("DMFS"). Execution of the Pre-Feasibility Study forms part of an integrated project development process for the MCPP and is informed by the independent technical report on the Rukwa Coal Resource, as well as the information contained in the MCPP Information Memorandum ("Summary of Investment Opportunity") and the Concept Study that was completed during Phase 1, Stage 1 of the DMFS.

Financial summary:

-     Four alternative options of the selected mining method identified for project development (the financial data ranges that follow are dependent on which of the project development options is selected);

-     The Project is financially feasible for all of the options investigated;

-     The Project was assessed for a 28 year mine life, with an average annual coal production of 1.48million tonnes over the life of mine;

-     Annual estimated coal sale revenues of between US$48.4million and US$48.6million;

-     All-in cost margin ranges from 49% to 62%;

-     High all-in cost margin reflects low operating costs as a result of the proposed mining method and shallow ore body, small sustaining capital expenditure and fixed coal price as received from the power plant;

-     The high all-in cost margin is a key indicator of the robustness of the Project;

-     Capital investment of between US$38 million and US$73 million and based on current preferred option the capital investment will be US$ 38 million;

-     Payback period for the Project is estimated at between 2.6 - 3.65 years and based on the current preferred option the payback period will be 2.6 years;

-     Applying a real discount rate of 5.5% the best estimated Net Present Value ranges from US$211million to US$244million, based on current preferred option the Net Present Value will be US$211 million with an IRR of 54%;

Coal Mineral Resource:

Mineral Resource classification and reporting has been conducted in accordance with the requirements of NI 43-101 by Geological Exploration Mining Evaluation Consulting Services (Pty) Limited ("GEMECS") who has reviewed the coal properties in accordance to the terms, definitions and guidelines provided in "A Standardized Coal Resource/Reserve Reporting System for Canada". The estimated Coal Inferred and Indicated Mineral Resources are outlined in the 'Rukwa Mineral Resource Section' outlined underneath the 'Notes for Editors' section below.

Capital Footprint and Battery Limits:

The Capital Footprint and Battery Limits for the mine and plant includes the opencast pit, mining and processing equipment, mining and plant buildings, all mining stockpiles, coal product transportation infrastructure to power plant, electrical supply to and reticulation within the mine and plant area, excess water pipeline to power plant, staff accommodation and communication systems to and reticulation within the mine and plant area.  The power plant's Battery Limits (excluded from Minxcon's Battery Limits) include everything inside their security fence or boundary, electrical power lines, ash storage dams as well as a water line from Lake Rukwa.  The mine will be responsible for the construction of all items that fall within its capital footprint as well as various infrastructure leading up to the new envisioned power plant.

Mining and Processing Options:

Four different options were investigated during Phase 2 of Stage 1 of the DMFS. The differences in the 4 options are mainly applicable to alterations in mining operating costs and mining capital costs:

·      Option 1 (Surface Miner, Contractor, No Crushing)

·    Option 2 (Surface Miner, Owner Mining, No Crushing)

·    Option 3 (Free Dig, Contractor Mining, Crushing)

·    Option 4 (Free Dig, Owner Mining, Crushing)

All these options described above were valued through Minxcon's discounted cash flow ("DCF") model to demonstrate the viability and justifiability of extraction of coal under a defined set of realistically-assumed modifying factors.

7 different coal seams exist for the Rukwa Coal Mine.  It was proven that a constant coal production over the total Life of Mine ("LoM") can be achieved.

Capital Expenditure:

All costs were sourced from actual quotations as provided by the Original Equipment Manufacturers ("OEMs") and/or from retail companies. Where quotations could not be sourced, historical costs and quotations were escalated to align with the current financial year and market inflation figures. Detail about the capital is described in the relevant mining and plant reports. Capital items were awarded weighted percentages based on the accuracy of the source.

The capital estimation was based on the capital footprint of the MCPP. This footprint is defined by the battery limit of the engineering and infrastructure design. The battery limit is broken down into a work breakdown structure ("WBS") defining the various area of interest. It was assumed that the fleet would be replaced every five years at 70% of original fleet cost in the capital schedule for Option 3 and Option 4.

Discounted Cash Flow Modelling:

Minxcon's in-house DCF model was employed to illustrate the NPV for the operation in real terms. The NPV is derived from post-royalties (Note: No royalties are payable on strategic minerals in Tanzania and coal is deemed to be a strategic mineral in Tanzania) and tax, post-debt real cash flows, using the techno-economic parameters, commodity price and macro-economic projections.

This valuation is based on a free cash flow and measures the economic viability of the ore body to demonstrate if the extraction of the Mineral Reserve is viable and justifiable under a defined set of realistically-assumed modifying factors.

A discount rate of 5.5% (in real terms) was calculated for the discount factor, but the NPV was also shown for a range of discount rates. The full intrinsic value of the operation was reported - no attributable value was calculated. For the purpose of the financial model the coal prices were constant throughout the LoM.

Project Key Risks:

The business of mining and mineral exploration and production by their nature contain significant operational risks. The business depends upon, amongst other things, successful prospecting programmes and competent management. Profitability and asset values can be affected by unforeseen changes in operating circumstances and technical issues. 

Factors such as political and industrial disruption, currency fluctuation and interest rates could have an impact on future operations, and potential revenue streams can also be affected by these factors.  The majority of these factors are, and will be, beyond the control of any operating entity. 

The Project is identified as being most sensitive to the coal price and operating costs.

Contacts

Kibo Mining - Notes to editors

Kibo Mining is listed on the AIM market in London and the AltX in Johannesburg. The Company is focused on exploration and development of mineral projects in Tanzania, and controls one of Tanzania's largest mineral right portfolios. Tanzania provides a secure and stable operating environment for the mineral resource industry and Kibo Mining therein.

Kibo Mining holds a thermal coal deposit at Rukwa, which has a significant JORC compliant defined resource (See Table 1 below), and is developing a 250-350MW mouth-of-mine thermal power station, the Mbeya Coal to Power Project ("MCPP"), previously called Rukwa Coal to Power Project ("RCPP"), with an established management team that includes Standard Bank as Financial Advisor.  Kibo is undertaking a Coal Mining Definitive Feasibility Study and a Power Pre-Feasibility Study for the Mbeya project with an integrated Coal-Power interim study report to be released in the near term. On 20^th April 2015, Kibo signed a Joint Development Agreement for the completion of the Definitive Feasibility Studies and development of the MCPP with China based EPC contractor SEPCO III.

The Company also has extensive gold focused interests including Lake Victoria Goldfields and Morogoro projects. At Lake Victoria, the Company has projects with a 550,000oz JORC compliant gold Mineral Resource at Imweru Project (See Table 2 below) and a 168,000oz NI 43-101 compliant gold Mineral Resource at the Lubando Project (See Table 3 below) in which the Company holds a 90% attributable interest. The Company is currently undertaking a Definitive Feasibility Study on its Imweru Project.

Kibo also holds the Haneti Project on which the latest technical report confirms prospectivity for nickel, PGMs, gold and strategic metals including lithium. 

Kibo Mining further holds the Pinewood (coal & uranium) project where the company has entered into a 50/50 Exploration Joint Venture with Metal Tiger plc.

Finally the Company also holds the Morogoro (gold) project where the company has also entered into a 50/50 Exploration Joint Venture with Metal Tiger plc.

The Company's projects are located in the established and gold prolific Lake Victoria Goldfields, the emerging goldfields of eastern Tanzania and the Mtwara Corridor in southern Tanzania where the Government has prioritised infrastructural development attracting significant recent investment in coal and uranium. The Company has a positive working relationship with the Tanzanian government at local, regional and national levels and works hard to maintain positive relationships with all communities where company interests are held.  The Company recognises the potential to enhance the quality of life and opportunity for Tanzanian citizens through careful development of its projects.

Updates on the Company's activities are regularly posted on its website www.kibomining.com  

Technical data

Rukwa Mineral Resource

Table 1 below presents a table showing the Mineral Resource estimate for the Rukwa Coal Project. The table is taken from an NI 43 101-Compliant Report by GEMECS (Pty) Ltd dated April 2012.

Table 1

*Kibo holds 100% of the Rukwa Mineral Resource

Imweru Mineral Resource

Table 2 below presents a table showing the Mineral Resource estimate for the Imweru Project  at  a base case economic cut-off grade for the reporting of the resource  of  0.4 g/t. The table is taken from a JORC-Compliant Report by Tetra Tech EBA dated February 2014.

Table 2

*Kibo holds 90% of the Imweru Mineral Resource

*   Total estimates are rounded, based on composites capped at 26 g/t gold at Imweru Central and 25 g/t at Imweru East, the cut-off grade is based on a gold price of US$1,200 and a 90%  metallurgical recovery is assumed in calculation of cut-off grade. A base case of  0.40  g/t has been selected.
 

** Classification of Mineral Resources incorporates the terms and definitions from the Australian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code) published by the Joint Ore Reserve Committee (JORC)

Lubando Mineral Resource

Table 3 below presents a table showing the Mineral Resource estimate for the Lubando Project at a base case economic cut-off grade for the reporting of the resource of 0.5 g/t Au. The table is taken from an NI 43 101-Compliant Report by EBA Engineering Consultants Limited (now part Tetra Tech EBA) dated August 2009.

*Kibo holds 90% of the Lubando Mineral Resource

* Numbers are rounded. Composites capped at 10.85g/t gold. Cut-off grade of 0.5 g/t gold based on a gold price of US$850/oz and assumed 100% metallurgical recovery.CIM definitions were followed for Mineral Resources.

Pursuant to the terms of an inherited agreement with Barrick East Africa Exploration LTD (BEAL), Kibo currently has an effective 90% interest in the Imweru and Lubando Project (and thus a 90% attributable interest in the Imweru and Lubando Mineral Resources shown in Table 2 and 3 above), with Barrick having a 10% carried interest up to a decision to mine at which point they have to contribute or be diluted to a 2% net smelter royalty. BEAL also has a first right of refusal pursuant to which they can buy the 90% interest in the project at an agreed market related value after completion of a Bankable Feasibility Study.  Kibo remains the operator of the project.

Review by Qualified Persons

The information in this announcement that relates to the Rukwa Coal Mineral Resource is taken from a report titled "Independent Technical Report for the Rukwa Coal Project, Mbeya Region, United Republic of Tanzania" dated 19^th April 2012 by CD van Niekerk Director and Principal Geologist with the firm GEMECS (Pty) Ltd. Mr van Niekerk is a Professional Natural Scientist with the South African Council for Natural Scientific Professions (SACNASP), Registration No. 400066/98 and a Fellow Member of the Geological Society of South Africa. He has relevant experience and technical qualifications to be a "Qualified Person" for reporting coal resources to the NI 43-101 Standard

Information in this announcement that relates to the Imweru Mineral Resource is taken from the report titled "Resource Update for the Imweru Property Geita Region Northern, Tanzania, JORC Competent Persons Report" dated February 17^th 2014 (the "Report"). The Report states a JORC-compliant Mineral Resource estimate and was prepared for Kibo Mining plc by James Barr P.Geo. and Darryn Hitchcock P.Geo. Senior Geologist and Geologist respectively with TetraTech EBA Ltd. Both Mr. Barr and Mr. Hitchcock are registered as Certified Professional Geologists with Association of Professional Engineers and Geoscientists of British Columbia a recognised professional organisation. Mr Barr as principal author responsible for the Report has experience in the evaluation and reporting of Archaean Gold projects and is a "Qualified Person" for reporting gold resources to the JORC Standard. He consents to the inclusion in this document of the matters based on his information in the form and context in which they appears. 

The information in this announcement that relates to the Lubando Mineral Resources is taken from a report titled  "Technical Report on the Lubando property, Mwanza, Tanzania" dated 31^st  August 2009" (the "Report") The  Report is NI 43-101 compliant and was prepared for Great Basin Gold Rusaf Gold Limited by Nathan Eric Fier C.P.G., P.Eng. Market Director for EBA Engineering Consultants Ltd and a Senior Mining Consultant. Mr. Fieris registered as a Certified Professional Geologist with the American Institute of Professional Geologists, Registration No 10062, and a professional Engineer in British Columbia, Canada Registration No. 135165. He has extensive experience in the evaluation and reporting of Archaean Gold projects.

The Company's Exploration Director, Noel O'Keeffe has reviewed the resource reports and the references to them in this announcement.

Johannesburg

12 August 2015

Corporate and Designated Adviser

River Group