(Sharecast News) - Tanzania-focussed coal company Edenville Energy said on Wednesday that its subsidiary Edenville International Tanzania (EITL) has entered into a $1m (£0.79m) loan agreement with its strategic partner, Infrastructure and Logistics Tanzania (ILTL).
The AIM-traded firm said the signing of the loan agreement followed on from the recently-announced coal mining agreement with ILTL, which provided for a fixed rate mining and processing contract at its Rukwa project.
It said the coal mining agreement had a contract term of four years, and would automatically be renewed for a further period of four years, unless terminated by either party.
The company's directors said they were expecting a sales and marketing agreement to be signed shortly, representing the last of the three proposed agreements with ILTL, as it had previously indicated.
It said the sales and marketing agreement, as encapsulated within the coal mining agreement, would enable ILTL to market coal to additional customers beyond EITL's existing customer base at an agreed rate per tonne of washed coal, that would be paid to EITL, providing Edenville with additional revenue streams.
ILTL would provide an anchor tenancy at Rukwa via the initial purchase of a minimum of 3,000 tonnes of washed coal per month, before increasing to 5,000 tonnes per month over the ensuing year.
Key conditions of the loan agreement were that it would begin within 30 days of the start date of the coal mining agreement, and that the first tranche would be between $0.35m and $0.4m.
The second tranche would be between $0.25m and $0.3m, and the third tranche would be between $0.2m and $0.3m.
Any loan tranche would be repaid by Edenville to ILTL within six months from disbursement, and the loan would attract an interest rate of 9% per annum, only on funds drawn by Edenville.
Edenville said it was not expecting to exercise its rights to the second and third tranches, although it had entered into the agreement as there were no additional charges or penalties should it choose not do so, and thus it provided greater access to capital should it be required in the future.
The company said it was expecting operations to restart at Rukwa by mid-August, following planned personnel movements by ILTL representatives and the lifting of travel restrictions.
EITL had used the Covid-19 shutdown to source key plant replacement spares, such as conveyor belting, following consultation with ILTL, while also finalising its mine restart plan.
A security team had remained on site since operations were suspended in April.
"With a comparatively low interest rate for loans of this nature, no material additional charges, implementation fees, penalties or equity kickers, we believe [the loan] highlights the collaborative approach both EITL and ILTL are taking on the project, and provides Edenville with greater access to capital as required," said chief executive officer Alistair Muir.
"The contract mining scenario under the coal mining agreement means the historic breakeven tonnages cited by Edenville are no longer relevant, as the company now expects to be profitable from operations from the first tonne of washed coal that is produced.
"The focus of Edenville is therefore to expand the existing coal purchaser client base and to that end, the company expects to announce shortly the sales and marketing agreement with ILTL, which will bring with it not only an anchor tenancy of up to 5,000 tonnes per month of washed coal, but also further incentive for ILTL to use its network to source additional customers."
At 1345 BST, shares in Edenville Energy were up 0.22% at 0.045p.