Kibo Energy PLC (“Kibo” or the “Company”), the multi-asset, Africa focused, energy company, is pleased to announce that it has today signed a binding Term Sheet with Sanderson Capital Partners (“Sanderson”) for the conversion of Sanderson’s 2.5% equity interest in the Company’s 100% owned Tanzanian subsidiary, Mbeya Development Company Limited (“Mbeya Development”) to ordinary shares in Kibo (the “Conversion”).
Mbeya Development is the holder of the Company’s physical 120.8Mt Coal Resource (see RNS dated 11 April 2016) in Tanzania under Mbeya Coal LTD as well as the power project under Mbeya Power LTD. Kibo is continuing its clarification enquiries regarding the TANESCO decision referred to in the 14 February 2019 RNS. In parallel the Company is also continuing to pursue other commercial opportunities for the Mbeya Coal to Power Project (“MCPP”), previously identified during the development of the MCPP which now present very attractive options given the advanced development status of the MCPP. These include amongst others the possibility to develop the MCPP as a dedicated facility for the power export market and / or local private market.
Conversion of Sanderson’s 2.5% Interest in Mbeya Development
· Kibo will issue 126,436,782 new Ordinary Shares of par value €0.015 (the “Conversion Shares”) to Sanderson in conversion of its 2.5% minority interest in Mbeya Development. The amount of Conversion Shares is calculated on the basis of a valuation of GBP 66 million for 100% of the Mbeya Coal Resource based on the weighted average total of the estimated market value of Mbeya Development’s Coal Resource held under Mbeya Coal LTD and the net present value of the proposed Coal Mine based on a 1.5 million ton per annum production figure as determined in the definitive mining feasibility study for the Mbeya Coal Mine . The Conversion Shares have been calculated based on a Kibo share price of GBP0.013050 (being €0.015 at a GBP:EUR exchange rate of 1.1494). The underlying carrying value of Mbeya Development has been capitalised as an intangible asset at consolidated group level amounting to £15,896,105 as at 31 December 2017, as per Kibo’s latest available audited group consolidated accounts.
· Sanderson will be entitled to a 0.3% royalty of the future operating profits of the proposed Mbeya Coal Mine should it go into production. This royalty is capped at a maximum of GBP 2 million and an annual production of 1.5million tonnes per annum over a mine life of 25 years.
· Sanderson will retain no claim of whatever nature in the equity of Mbeya Development.
· Sanderson will have the option to appoint one representative to the Board of Kibo as a non-executive director, conditional on the appointee being acceptable to Kibo and meeting all other regulatory requirements for appointment, and only for as long as Sanderson holds a direct interest of more than 20% of Kibo’s issued share capital. Should Sanderson’s interest fall below this threshold, Kibo will have the option to remove the Sanderson appointee from its Board. The details of the service contract of any proposed director would be released at the time a Sanderson representative is appointed.
· Sanderson will notify Kibo in writing, five days in advance of any intention to sell, loan or otherwise dispose of any of its shares held in Kibo and acquired under binding Term Sheet, together with the amount it wishes to dispose of and the price per share it is asking. This is to allow Kibo’s brokers the option to procure the placing of such shares at the relevant price and so ensure an orderly trading in the Company’s shares.
Continuation of Forward Payment Facility
The Term Sheet also provides for the continuation of Kibo’s USD 2,940,000 Forward Payment Facility (the “Facility”) signed between Kibo and Sanderson, the full details of which are contained on the Company’s RNS dated 21 December 2016 and which remains available under the same terms and conditions save for points covered below. The facility is currently undrawn with the previously outstanding balance having been settled in full in July 2018 (see RNS dated 9 July 2018).
The Facility will be available for a first immediate draw by Kibo, amounting to GBP100,000 and a second draw on or any time before 15 March 2019 amounting to no more than GBP400,000. Any additional draw-downs of the balance of the USD 2,940,000 limit are to be agreed between Kibo and Sanderson on a case by case basis, and all draw-down amounts will be subject to a facilitation and implementation fee of GBP5,000 per GBP100,000 drawn down. Kibo is not obliged to draw down any of the Facility and the initial fee payment of USD732,036 of ordinary shares in Kibo, made to Sanderson under the original Facility arrangement, was a one-off payment and is not required to be paid again.
This Conversion is welcomed by the Company as it provides validation of what it believes is an attractive investment opportunity provided by its energy assets across Africa and the UK. Sanderson has been a long and stable supporter of Kibo from an early stage and now with a significant shareholding and the option for board representation, Sanderson is expected to bring enhanced funding capability to the Company both internally and from its financial business network. We are also encouraged by Sanderson’s willingness to include an orderly market-style provision in the agreement, which Kibo believes is a vote of confidence in the future prospects of our asset portfolio. Further, should Sanderson elect to exercise its option to appoint a director to the Kibo Board the effect would be to bind it to compliance with the Company’s share dealing code, imposing strict share trading controls on it, in addition to the aforementioned orderly market arrangement.
The continuation of the Facility also provides the Company with the option of short-term funding as necessary within the Facility limit to enable it to maintain momentum behind its on-going development work across its African and UK projects while also examining a range of additional funding options for the Company.
Application will be made for the Conversion Shares to be admitted to trading on AIM and the JSE AltX markets. Trading in the Conversion Shares is expected to commence on AIM and the JSE on or around 11 March 2019 (‘Admission’). Following Admission, the Company will have 766,467,851 shares in issue. This figure may be used by shareholders as the denominator for calculations to determine if they are required to notify their interest in, or a change to their interest in, the Company under the FCA’s Disclosure Guidance and Transparency Rules.
Following the settlement, Sanderson’s shareholding in the Company will increase from 52,764,905 to 179,201,687 ordinary shares representing an increase in interest from 8.24% to 23.38% in the Company. This will result in Sanderson becoming a related party of Kibo for the purposes of the AIM Rules for Companies. The interest in the Company of Kibo’s other significant shareholder, Sechaba Natural Resources Limited, will decrease from 22.07% to 18.43% on an unchanged holding of 141,260,030 ordinary shares.
Louis Coetzee, CEO of Kibo, said: “We are very pleased with the agreement reached with Sanderson to convert its underlying interest in Mbeya Development into Kibo PLC shares. Sanderson will now become a true cornerstone institutional investor in Kibo and we are optimistic that Sanderson will also defend its shareholding position in future bringing further stability to the Company’s ongoing funding position. We also see this as a strong signal to the market of Sanderson’s confidence in Kibo’s project portfolio which continues to advance on multiple fronts as we seek to address the critical requirement for energy security in sub-Saharan Africa by becoming a leading regional power producer.”
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