Aviva raises P40m in placement

Brian Benza
Staff Writer | Friday July 22, 2011 00:00

 

The BSE-listed explorer said the money would be used to finalise an Environmental Impact Assessment (EIA) for its Mmamantswe coal and power station in Botswana and continue exploration at its West Kenya gold/base metals joint venture project.

According to a company statement, Sentient, which will invest $3.5 million in the company, will be offered a seat on the company's board. Overall, the placement will involve the issue of 30 million new shares in the company at 20 cents a share.

Aviva chief executive, Lindsay Reed, said support for the placement was pleasing and the company's ability to secure a cornerstone investor of the calibre of Sentient was seen as a strong endorsement of the potential of its assets. 'The proceeds received will also ensure that Aviva is fully funded for aggressive work programmes in West Kenya for 2011-2012,' Reed said.

The placement will be subject to shareholder approval. The company said a project officer had been appointed for the EIA that was likely to be completed by early next year. According to a 10-million tonne per annum Run On Mine (ROM) scoping study done by the company, capital costs for the mine will be as much P2.8 billion while operating expenses will be as much as P75 per ROM tonne.

The company, which is promoting the 895 million-tonne Mmamantswe coal project, last year shelved a 1000MW coal-fired power plant for exportation to South Africa after the announcement of the Integrated Resource Plan (IRP) by South Africa's Eskom. As Aviva revives interest in the project on coal exports, it is expected that mostly Indian or Chinese suitors could soon be lining up. China consumes three billion tonnes of thermal coal annually, representing a key export market for many emerging producers. Mmamabula and Mmamantswe developers will be keen to leverage on the rising prices to seal supply contracts, which in turn will enable them to secure funding towards the commissioning of the projects.

Although Botswana's sole operating coal producer, Morupule, has firm off-take agreements with the Botswana Power Corporation and other users, higher prices could enable the colliery to negotiate improved contracts.

Development of the proposed Trans-Kalahari Railway (TKR) is critical for Botswana's ability to unlock the potential of its coal resources.

Construction of the railway line connecting the Mmamabula coalfield with the Namibian port of Walvis Bay, which is pegged at $10 billion, is expected to start in 12 to 15 months.'There are rail options being considered for large exports from here to the east and west, looking at the EU or India,' Reed said.

Botswana has an estimated resource base of 210 billion tonnes of coal.