Edenville Energy plc (LON:EDL), the company developing a coal project in southwest Tanzania, has given an update to DirectorsTalk on activities in connection with its recently established commercial coal production and coal to power project.
Commercial Coal Production
Since the start of commercial coal production in October 2017, the Company has been refining all aspects of the operation and selling coal to commercial customers.
Mining
Edenville’s mining operations are proceeding as anticipated, with high quality near surface coal being extracted from the Mkomolo deposit. Mining operations have been able to keep pace with demand and plant capacity despite the seasonal heavy rains.
To help fulfil the demand for coal we are experiencing and to potentially increase the amount of unprocessed coal the Company can sell, the Company has taken the decision to also start mining the Namwele deposit. Namwele, which sits to the south of the Mkomolo deposit, will be mined by our Tanzanian partner, Upendo Group Ltd. Upendo has already started clearing the overburden and we expect the first Namwele coal to be mined before the end of Q1 2018.
Coal Quality
We are very pleased to report that coal quality, in terms of both calorific value and ash content, is exceeding management’s initial expectations when mining commenced. Both the raw mined and processed coal has been extensively tested at our on-site laboratory and has returned values that meet our customer’s requirements.
Recent results from our on-site laboratory have given encouraging calorific values for Mkomolo, including 6,734 GCV (Gross Calorific Value in Kcal/Kg) on an air-dried basis, correlating with previous results from December 2017. Additionally, and of particular note, is the energy value contained in our raw coal fines material (material generally less than one sixteenth of an inch in size), recently testing at 4,753 GCV on an as received basis.
Should these values continue to be seen, we consider this will not only have a positive effect in terms of the value of commercial sales, but also on the long-term economics of the power plant development and related coal supply. This material would not require washing, thereby increasing the potential fuel supply for the coal to power project. Additionally, there may be the potential to sell some of this high calorific coal without it having to be processed through the wash plant, increasing the amount of coal the Company can sell.
Processing plant
The Company’s wash plant and associated equipment is currently running at a throughput of 30 to 40 tonnes per hour, operating six days a week for 8 to 10 hours a day. Edenville is therefore in a position to process 8,000 to 10,000 tonnes of mined material per month.
During the ramp up of operations higher than expected amounts of mudstone and fines were encountered, which reduced throughput in the processing plant. As a result, unit processing costs were marginally higher than management expected, however, this was offset by lower than expected unit mining costs.
Subsequently the Company intends to install both a Lamella water treatment system and pre-screen technology to improve the overall efficiency of the plant. The Lamella water treatment system will remove mudstone and coal fines from the water, providing the plant with cleaner water and the pre-screen technology will pre-screen the mined material, removing coal fines before they reach the wash plant. Once implemented, hourly production rates should increase to 80 to 100 tonnes per hour, thereby bringing operational costs per tonne back in line with management expectations, in parallel with the plant reaching its full production capacity.
Coal orders
Throughout January we have continued to process and ship the bulk preliminary orders detailed in the announcements made on 23 November 2017 and 8 January 2018. We remain in detailed discussions regarding contractual terms with several of these groups and others regarding potential long-term orders that total over 10,000 tonnes of coal per month.
Additionally, the Company has received further orders for trial material in the last fortnight. These requests include one for 4,000 tonnes of coal from an industrial customer. This customer has indicated that, if the product is demonstrated to be appropriate for their needs in trials, they would seek to increase their order.
In aggregate, trial and other orders for approximately 9,000 tonnes of coal have now been received and these have either been shipped or are in the process of being fulfilled. All have been, or are being, supplied on a commercial, paid for, basis.
These trial orders have been substantially larger that we initially envisaged and continue to be received and shipped. Through these we believe we are demonstrating the quality of our coal and the ability of Edenville to be a trusted and reliable supplier. The entering into of the long-term coal supply contracts we are currently discussing crucially depends on the ability to secure reliable and cost-effective transport for the coal. To that end, we and our customers are in negotiations with a number of transport providers. Additionally, we are investigating the appropriateness of having our own base fleet of trucks to ship coal to customers, reducing our dependence on third party transport providers. At present, no assurances can be given as to the form that any long-term coal supply contracts may take, but we are confident that once logistical issues are resolved long term contracts can be entered into and further updates will be provided as appropriate.
Coal to Power Project
The Company continues to work with its partner Sinohydro Corporation of China (“Sinohydro”) to progress the Company’s coal to power project. Sinohydro’s representatives have completed their pre-feasibility and economic assessment work and remain very supportive of the project. Since the last update on 23 November 2017 further productive meetings have been held with the Tanzanian Ministry for Energy (the “Ministry”) and Tanzania Electric Supply Company (“Tanesco”) to progress the project. It should be noted the opening up of the mine has provided the Company with valuable data on the coal quality and structure of the deposit, critical when considering the power plant design which will depend on this fuel source.
In line with other coal to power projects in Tanzania, the Company is progressing discussions with a view to, in the first instance, entering into an MOU with the Ministry and Tanesco setting out, inter alia, the size of the project, the proposed structure of a Power Purchase Agreement (PPA), tariff levels, and connectivity into the planned transmission line that will pass through the Sumbawanga Region. The timing of this is largely in government hands, although we continue to have a very good working relationship with them and they recognise the demonstrable benefits Edenville’s project would bring to the region.
The Company looks forward to continuing to provide updates as appropriate both on our commercial coal production and the coal to power project during this exciting and rapidly developing period for Edenville.
