Tlou Energy Ltd (ASX:AIM:TLOU) OPERATIONAL REPORT – QUARTER ENDING 30 JUNE 2017

Tlou Energy Limited, the AIM and ASX listed company focused on delivering power in Botswana and southern Africa through the development of coal bed methane (‘CBM’), is pleased to provide its operational report in respect to its Lesedi CBM Project in Botswana (“Lesedi”) for the quarter ended 30 June 2017.

Highlights

• Contract for 250km seismic survey signed to commence in Q3 with aim to increase Gas Reserves and     Resources
• Mining Licence application lodged
• First power generated from CBM following the installation of a Gas Generator – providing reduced spend     on diesel and a proof of concept of ‘first gas monetisation’
• Board bolstered with appointment of Non-Executive Director Hugh Swire and post quarter end the appointment of Ms. Linah Mohohlo

TLOU ENERGY LIMITED PROJECTS

Lesedi CBM Project Area, Botswana

PLs 001-003/2004 and PLs 35 & 37/2000

Tlou Energy Limited 100%

The Lesedi project consists of five CBM prospecting licences in Botswana covering an area of approximately 3,800km².  These licences are currently the focal point for the Company’s operations and include the Selemo pilot project where the Company has been producing gas for approximately 12 months. 

The status of the five Lesedi Area Prospecting Licences is as follows:

Contract for 250km seismic survey signed

The Company entered into a contract for a 250 km 2D seismic program with Velseis Pty Ltd, an Australian seismic acquisition and processing company providing a fully integrated range of seismic technologies.  Velseis has built a reputation as the leading Australian contractor in this field, with over 25 years of experience throughout the Asia-Pacific Region.  The seismic program is scheduled to commence in Q3, 2017.  It is envisaged this survey will give the Company the opportunity to expand its gas reserves and resources as it progresses towards developing the first CBM gas to power project in Botswana.

The seismic survey will assist in the next step of Tlou’s plan to drill more wells by providing it with enhanced knowledge of the sub-surface in its project areas.  The results along with the data from the subsequent planned core well program may also lead to further gas reserves and contingent resources being certified.

Tlou lodges Mining Licence Application for the Lesedi CBM project with the Ministry

The Company lodged a Mining Licence Application for the Lesedi CBM project with Botswana’s Department of Mines in the Ministry of Mineral Resources, Green Technology and Energy Security (“the Ministry”).  The Mining Licence for the Lesedi CBM Project is the first application of its kind to be lodged in Botswana.

In Botswana, holders of Prospecting Licences (“PL”) are issued Mining Licences once exploration on a relevant Prospecting Licence has been concluded and the holder of the Prospecting Licence is ready to commence commercial production.  Mining Licences are assessed in accordance with the prescribed statutory requirements of the Botswana Mines and Minerals Act.  Two major components of a Mining Licence application are an approved EIA (granted for the Lesedi Project in September 2016) and a feasibility study for the relevant project.

Some of the benefits of a Prospecting Licence being converted into a Mining Licence include:

1.    Tenure: The permit being converted from a short-term Prospecting Licence tenure (2-3 years) to a longer-term tenure (20+ years).

2.    Commercial rights: A Mining Licence affords the holder the legal right to sell the resource for which the licence has been granted. The granting of a Mining Licence is therefore a pre-requisite to commercialising a gas resource.    

The award of the Mining Licence will be another milestone for the Company which further enhances the first mover advantage to develop a Gas-to-Power project in the country.  The issue of a Mining Licence will pioneer the development of a new and exciting natural CBM gas industry in Botswana, an industry that will lead to a new indigenous source of energy and employment for the country.  Over time, it will potentially allow new manufacturing industries to develop using Botswana CBM gas and facilitate the creation of a new renewable energy industry.  This is due to gas being a relatively clean and cost-effective way to provide peaking power to complement the often-intermittent nature of renewable energy. 

Conversion of field generation from diesel to gas

The Company generated its first power from CBM at its field in Botswana following the installation of a Gas Generator at the Selemo project area.

Power required to run pumps and metering at the Selemo wells was previously supplied by diesel generators.  During the quarter, the Company’s operations team replaced a diesel generator with a new gas fired generator, running on the gas being produced from Tlou’s wells.  This is the first Gas-to-Power via Tlou’s CBM, and is a significant milestone for the Company and in effect a proof of concept of ‘first gas monetisation‘.  This achievement reinforces Tlou’s view that CBM Gas-to-Power is achievable in Botswana using gas from the Lesedi Project.

The Cummins G8.3 generator can supply up to 60 kVA of power and has been customised to run on a small portion of the gas currently being produced at the Selemo pilot which would otherwise be flared. It is expected that the conversion of generation from diesel to gas will initially reduce the Company’s diesel requirements by approximately 50,000 litres per year. These savings should grow with time given that a second gas to power generation unit is planned to be installed.

Mamba Project Area, Botswana

PLs 237-241/2014

Tlou Energy Limited 100%

The Mamba project consists of five CBM prospecting licences in Botswana covering an area of approximately 4,500km².  The Mamba area is considered to be highly prospective being situated adjacent to Tlou’s Lesedi CBM Project and being on-trend with the encouraging results observed to date.  In the event of a gas field development by Tlou, the Mamba area provides the Company with considerable flexibility and optionality.

Renewal applications were submitted for the Mamba licences in March 2017.  The Company has received confirmation from the Department of Mines that they were unable to complete their review of the renewal application prior to the end of June but undertook to expedite their review as soon as possible.

The status of the Mamba Area Prospecting Licences is as follows:

Corporate

In June 2017 the Company was pleased to announce that Mr Hugh William Swire was appointed to the Board as a Non-Executive Director.

Hugh, aged 37, is a partner in Mahon China, an established investment management and advisory partnership based in Beijing.  Active in China since 1985, Mahon China have over three decades of experience advising foreign companies with investments and corporate activities in China.

Hugh has expert knowledge and direct investment experience in the low carbon water, energy and technology sectors having completed and exited investments into several leading companies in the low carbon sector.  Hugh travels to China regularly and using his Chinese language skills after graduating from Oxford University with a BA (Hons) in Chinese.

Post end of the quarter, Ms Linah Mohohlo, was also appointed to the Board as a Non-Executive Director.  Ms. Mohohlo is the former Governor of the Bank of Botswana, holds a Bachelors Degree in Economics from The George Washington University, Washington DC, a Masters Degree in Finance and Investment from University of Exeter, UK and a Diploma in Accounting and Business Studies from the University of Botswana.

New Ventures

While Tlou is focussed on the Lesedi CBM project, the Company will continue looking at potential areas of expansion should the possibility arise.

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Anthony Gilby

Managing Director

Tlou Energy Limited

Website: www.tlouenergy.com