(Alliance News) - Edenville Energy PLC on Friday warned it might need to conduct another fundraise as production from its flagship Rukwa coal project in Tanzania was only a fraction of estimated capacity.
Shares in Edenville were down 23% at 0.034 pence in London in midday trading.
The coal producer said operational progress since its interim results were announced on September 27 has been limited, following the start of the rainy season in November and "working capital constraints".
As a result of this, only 820 tonnes of washed coal was produced at Rukwa from 21 September to the present time, despite estimated production capacity being 12,000 tonnes per month. It sold 1,021 tonnes of washed coal, including from from its stockpile, which "was sufficient to satisfy a long-term customer".
These financing issues have presented themselves despite refinancing efforts, including Edenville's April and September fundraisings, raising GBP510,000 and GBP300,000 respectively. A significant portion of this was invested in plant and equipment and has helped the company start mining at the new Northern Area. Almost 30,000 tonnes of overburden was stripped in September and October, making access to the coal zone easier.
Edenville did find potential new customers but, when combined with existing customers, demand exceeds Rukwa's current capacity and it will be necessary for the firm to obtain additional working capital if its wants to meed this demand.
In August, Edenville's repayment holiday on its loan from Lind Partners LLC ended, and repayments resumed. The current balance is USD835,760 and is repayable at USD50,637 per month.
To cover its immediate working capital needs, Edenville has signed an agreement with a private lender and obtained a GBP100,000 non-convertible loan with a 20% per annum fixed coupon rate which must be repaid by February 25, 2020. With this loan, Edenville's cash stands at about USD190,000. This is enough to meet immediate needs and meet existing orders but will not allow Edenville achieve the planned capacity of 12,000 tonnes per month or continue making its 2020 Lind loan repayments.
As such, Edenville is now in talks for a project level investment with a potential strategic investor, who was not named but has "experience in Tanzania and the neighbouring region". Talks are "at an advanced stage" and heads of terms are expected to be reached in December. However, there is no guarantee of a positive outcome.
If no project level funding is obtained by early in the first quarter of 2020, Edenville will need another capital injection. Having spoken to its broker and to participants in its September fundraise, Edenville said sourcing more capital is "achievable".
In order to save money, Edenville's directors have either not taken their salaries or opted for reduced salaries since September 2019.
Chief Executive Alistair Muir said: "Whilst the current working capital situation is hampering our ability to reach these levels, I am optimistic that all is in place to achieve these production levels in the medium to long term once the working capital situation has been addressed. Our desire is to address the shortfall with a capital injection at the project level if possible.
"Assuming we are able to source the requisite funds, our aim still remains to become cash flow positive from operations during 2020. I look forward to providing further updates as soon as practicable."
By Anna Farley; annafarley@alliancenews.com
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