botswana - juniorindaba...10 key projects shumba energy has three advanced-stage projects totalling...
TRANSCRIPT
JUNE 2018
BOTSWANA
- The Future of Regional
Coal Production
This presentation has been prepared by and issued by Shumba Energy Ltd (“Shumba Energy”) to assist it in informing interested parties about theCompany and its progress. It should not be considered as an offer or invitation to subscribe for or purchase any securities in the Company or as aninducement to make an offer or invitation with respect to those securities. No agreement to subscribe for securities in the Company will be enteredinto on the basis of this presentation.
You should not act or refrain from acting in reliance on this presentation material. This overview of Shumba Energy does not purport to be all inclusiveor to contain all information which its recipients may require in order to make an informed assessment of the Company’s prospects. You shouldconduct your own investigation and perform your own analysis in order to satisfy yourself as to the accuracy and completeness of the information,statements and opinions contained in this presentation and making any investment decision.
The Company has not verified the accuracy or completeness of the information, statements and opinions contained in this presentation. Accordingly,to the maximum extent permitted by law, the Company makes no representation and give no assurance, guarantee or warranty, express or implied, asto, and takes no responsibility and assume no liability for, the authenticity, validity, accuracy, suitability or completeness of, or any errors in oromission, from any information, statement or opinion contained in this presentation. The contents of this presentation are confidential.
This presentation includes certain “Forward- Looking Statements”. The words “forecast”, “estimate”, “like”, “anticipate”, “project”, “opinion”,“should”, “could”, “may”, “target” and other similar expressions are intended to identify forward looking statements. All statements, other thanstatements of historical fact, included herein, including without limitation, statements regarding forecast cash flows and potential mineralisation,resources and reserves, exploration results, future expansion plans and development objectives of Shumba Energy Ltd are forward-looking statementsthat involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and futureevents could differ materially from those anticipated in such statements.
The Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the ‘JORC Code’) sets out minimum standards,recommendations and guidelines for Public Reporting in Australasia of Exploration Results, Mineral Resources and Ore Reserves. The informationcontained in this announcement has been presented in accordance with the JORC Code and references to “Measured Resources”, “Inferred Resources”and “Indicated Resources” are to those terms as defined in the JORC Code.
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Disclaimer
1. Company Background
2. Projects
3. BOTSWANA - The Future of Regional Coal Production
4. Conclusion
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Contents
Company
Background
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Company Background
• Shumba Energy, a coal and energy company, was established in Botswana in 2011 to
provide the SADC region with low-cost coal and energy
• STRATEGY FOR 2018
Mining
Coal Trading
Logistics
Investments
• With 3 assets in the development phase Shumba Energy controls most of the advanced
coal projects in Botswana, including over 4.5 billion tonnes of coal for thermal energy and
exports.
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Company Background
• Listed on the Botswana Stock Exchange (BSE) with 264,604,249 shares in issues and a
market capitalisation of USD 32 million
• Invested and committed over USD 20 million in Botswana projects to date
• Shumba Energy is reaching its development objectives and now controls a significant
portion of advanced energy projects in Botswana, including over 4.5 billion tonnes of
coal for thermal energy
• 25% Shareholder of London listed Kibo Mining PLC ( USD 36m Market Cap)
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ALAN CLEGG - CHAIRMAN▪ Professional Engineer and Project and
Construction Manager▪ 30 years experience in mining and minerals
projects in over 150 countries▪ renowned expert in mining, technical
assessment, reporting and project valuation with extensive experience in stock exchange listings and capital raising
▪ currently holds six directorship positions in the mining and energy sectors and is a Fellow of the Institutes of Mining & Quarrying and Fellow of the Institute of Directors of RSA/UK
MASHALE PHUMAPHI – MANAGING DIRECTOR▪ Founding director of Shumba Energy▪ formerly part of the corporate finance team
of a London-based natural resources corporate finance and issuing house
▪ raised debt and equity finance for projects in the Americas, Europe and Africa in addition to conducting investment analysis and research
▪ Member of the United Kingdom Society of Investment Professionals (UKSIP) and the London-based Association of Mining Analysts (AMA)
THAPELO MOKHATI – FINANCE DIRECTOR• Management Accounting and Executive
Program in Mining and Minerals (WITS)• executive director of various junior mining
companies in various African countries over last 10 years
• 2004 – cofounded BSC Resources Ltd which is a junior exploration company with significant assets in nickel, copper and coal across South Africa
Board Members
SIPHO ZIGA – NON-EXEC DIRECTOR• Partner at Armstrongs Attorneys• 16 years experience in commercial
law and currently head theCommercial Department within thelaw firm
• Advisor to various parties in themost recent major capital raisingsfor mines in Botswana and acted aslead advisor for Shumba's listing onthe Botswana Stock Exchange
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KAPILDEO JOORY – NON-EXEC DIRECTOR• Over 20 years experience in international tax
planning and business structuring• Cofounder and executive director of
International Financial Services Limited which isa leading management company specialising ininternational tax, business and corporateadvisory services
• Fellow of the Institute of CharteredAccountants in England and Wales and anassociate member of the Society of Trust andEstate Practitioners
• Serves as a director of numerous offshore fundsand companies
Board Members
BOIKOPO PAYA– NON-EXEC DIRECTOR• B.Sc. and an M.Phil. in Geology with
extensive research experience• Currently the director of research at the
Botswana International University of Science and Technology (BIUST)
• Formerly the permanent secretary in the Botswana Ministry of Minerals, Energy and Water Resources for a period of two years as well as deputy permanent secretary in the same post since 2008
• Prior experience includes holding several directorships in the resource sector
GRANT RAMNAUTH – NON-EXEC DIRECTOR• B.Sc. (Hons) from London University and a
Joint M.B.A from Hartford University (USA and France)
• holds an Investment Advisor license in the offshore financial sector in Mauritius
• currently a Senior Partner of St. James's Place Wealth Management
• formerly with HSBC Bank (Jersey) in business development for international high-net-worth advisory and distribution
• Fellow of the Mauritius Institute of Directors
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Projects
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Key Projects
Shumba Energy has three advanced-stage projects totalling in excess of 4 billion tonnes ofcoal and one earlier-stage alternative energy asset spread across central Botswana:
• Mabesekwa Independent Power Plant: Being developed for power generation and coalto liquids in partnership with Kibo Mining PLC. The entire resource can be mined usingopen cast methods.
• Sechaba Mine: Attractive with substantial resources of which some are open castmineable. A mining license application is being made for this project.
• Morupule South Mine: Largest of Shumba’s coal resources with over 2.45 BillionTonnes. Fast tracking into production for early revenues. Possibility for several open pitmines.
• Letlhakeng Under Ground Coal Gasification Project: Early stage. Looking to develop theproject in conjunction with a strategic partner.
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Three assets in the development phase, one in exploration
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GEOSCIENCE EXPLORATION DISCOVERY DEVELOPMENT PRODUCTION
Morupule South Mine
2.45 Billion Tonnes
Mabesekwa Mine
1 Billion Tonnes
Sechaba Mine
1.1 Billion Tonnes
Letlhakeng UCG Project
300 Million Tonnes
• Thermal Coal for Export• Open cast and Underground mines• ESIA completed and submitted• Mine feasibility studies completed• Water supply from wellfield and
surface sources• ESIA Approved• Mining License application to be
submitted soon
• Coal for power generation• Open cast mine• ESIA approved• Mine feasibility studies
completed• Water supply from nearby dam• Surface rights attained• Mining license application
submitted
• Coal for both export and power generation• Open cast mines• ESIA underway• Mine feasibility studies underway• Railway siding 5km away• Surface water supply secured
• Underground coal gasification
• Exploration drilling underway
• Gas for power generation
Project Stages Overview
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• In August 2015 Shumba incorporated a new subsidiary, namely Shumba Coal TradingLtd (SCT), as a result of the demand from future off-takers of the Company’s exportcoal products
• “SCT establishment is to manage the trade of coal from projects owned byit and on an initial interim basis from other coal producers in order to buildexperienced capabilities in this key area of the future business value chainand meet our customers’ short-term needs.”
• Since January 2017 Shumba has established partnerships for the distribution of coalinto the region
• In May 2017 Shumba begun buying coal from regional coal producers and selling it intothe regional market
• Shumba is in partnership with Fraser Alexander currently investing in a 900kt capacityWash Plant which shall allow it to produce a variety of coal products for the regionalmarket
Coal Trading Division
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BOTSWANA -
The Future of Regional Coal Production
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Coal: Botswana’s under utilised potential
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Botswana is endowed with significant Coal resources, estimated at around 200 billion tonnes, yet the vast majority of these are yet to be exploited.
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Botswana Fiscal Incentives
Attractions of Botswana’s mining code include:
▪ Variable Income Tax: Lower rates for less profitable operations
▪ Capital allowances: 100% depreciation of capital expenditures
▪ Allowable losses: Unlimited carry forward of tax losses
▪ Import Duty: Mining equipment and spares are zero-rated
▪ Reduced Taxation for Downstream procession (refining of minerals)
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• Recent increases in global seaborne coal prices have made it more difficult for regionalconsumers to find high-grade coal and thus open the opportunity for Botswana-sourced coal to enter the market
• There is an increasing shortfall in the constant supply of washed coal exports in SouthAfrica, Zimbabwe, Zambia, Namibia and Botswana
Market
• Major coal producers withdrawing supply to the regional market to focus on export
• At over 25 million tonnes per annum the regional industrial demand for washed coal issubstantial and outstrips supply
• Eskom requires over 130 million tonnes of coal per annum and struggles to source thisdomestically
• South Africa production down 1.4% and exports up 2.9%, resulting in a 5.8% shortagein the inland market.
• Botswana Railways (BR) and Transnet Freight Rail (TFR) will link the BR network to theTFR network in the Waterburg
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Market
• Botswana coal is largely sub- and bituminous with in situ CV of between 18 and 22MJ/kg. When washed, CV improves to between 24 and 26.5 MJ/kg and of less than0.80% sulphur
• Over the past year, regional coal prices have escalated by c.45% to historic highs lastseen in 2005–2007
• Immediate opportunity for Botswana to increase supply into the region and for export
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Botswana Coal Economics
▪ Botswana coal more economical to mine than RSA
▪ Lower strip ratios
▪ Significantly cheaper diesel
▪ Shorter distance to several markets for coal in South Africa and
throughout the region
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Economics Example: Morupule South
Wood Mackenzie determined that the favourablemining conditions drive Morupule South’s costcompetitiveness. Morupule South is located in the firstdecile of the energy adjusted southern African miningcost curve (see above) and export FOT cost curve, evenafter adjusting for energy content to RB1 Benchmark(6000 Kcal/kg NAR).
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50
100
150
200
250
300
0 20 40 60 80 100 120 140
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osts
(Z
AR
/t)
Production (Mt)
Morupule South Botswana South Africa
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10
20
30
40
Ash
Domestic Supply Range Morupule South
0,00
0,20
0,40
0,60
0,80
1,00
1,20
1,40
Sulphur
0
1 000
2 000
3 000
4 000
5 000
6 000
Specific Energy
Southern African domestic coal quality benchmark (Raw)
Southern African export coal quality benchmarks (Washed)
2015 Energy Adjusted Southern African domestic coal
mining cost curve (2012 ZAR) Source Wood Mackenzie
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Market Example: Cement Industry
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▪ Logistics is key to the regionalmarket
▪ Morupule South Project iscloser than both theWaterburg Coalfield and theCentral Basin Coalfield in SouthAfrica to its target markets
▪ Major coal South Africanproducers reducing supply tothe regional market to focuson export
▪ Consumers can easily beserviced using road and rail.Both are currently being used.
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Existing access to SA customers by rail
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Imminent Heavy Haul Rail Link – Bots to SA
Lephalale
Musina
Maputo
Komatipoort
Ermelo
Ogies
Pyramid
Richards Bay
Botswana
Coal Fields
Thabazimbi
PolokwanePhalaborwa
Note: Joint Development between
Botswana Railways and TFR
▪ Connection between
Botswana coal fields to
Lephalale – 120 km
▪ Coordination with BR /
Transnet for a current
transportation volume of
over 20 mt/a through
existing rail system to
Richards Bay and other
ports
▪ Potential to also Supply
Eskom Power Stations
▪ Construction commences in
2020
Overview
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Ports available for the export of Botswana coal
Terminal de Carvão da Matola (TCM) (Mozambique)
Approx. 7.5 Mtpa capacity with plans to increase by a further20 Mtpa
Richards Bay Coal terminal (RBCT)
65.5M tons coal exported in 12 months to December 2011 (2Design capacity increased in May 2010 under Phase V to 91 Mtpa
Richards Bay Dry Bulk Terminal
Immediate phase 1 expansion from 3.2 million to 4.5 Mtpacapacity. Potential future phases up to 20 Mtpa capacity
Bulk Connections – Durban
Approx. 3 Mtpa coal export capacity
Matola
RBCT
Navitrade
Bulk Connections
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Coal Export Potential: Example
▪ Richards Bay Coal Terminal (RBCT) has a capacity of 91 mtpa
▪ Transnet Freight Rail (TFR ) has capacity of 82mpta
▪ Lephalele line to 13 mtpa by 2019
▪ Only 75 mt railed in 2017 due to coal shortages
▪ Botswana could have exported 7 mt in 2017
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Conclusion
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• Shumba Energy Mines
• Several low cost coal resources (over 4bn tonnes)
• Well positioned in terms of infrastructure (road and rail)
• Ready to go into production within 12 months
• Export quality coal
• Market
• Attractive Prices and Returns
• Shortage of supply to a growing regional demand
• Regional market is four times larger than the export market
• With the Waterberg link seaborne exports shall soon be possible
• Open to partnerships with existing industry players
• To fast track mine development
• Gain access to new markets
• Secure additional funding for projects
• Strategic joint ownership of mines
Conclusion
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