(Sharecast News) - Edenville Energy announced the signing of two new significant contracts to supply washed coal from its flagship Rukwa Coal Project in Tanzania on Wednesday.
The AIM-traded firm said that, since the opening of the Northern Mining Area earlier in the year, it had expanded its marketing efforts in the countries to the north of Tanzania, in particular Uganda, Rwanda, and Burundi.
Its directors said they believed Edenville had a competitive advantage over other Tanzanian coal producers, many of whom were located up to 700 kilometres further south of Rukwa.
As a result, the company signed two contracts to supply up to 6,000 tonnes and up to 3,000 tonnes respectively, of washed coal per month to industrial customers in Rwanda and Uganda.
The board aid the up-to-6,000 tonnes per month contract was signed with a Rwandan company, Tara Group, which is a wholly-owned subsidiary of Tanzanian company Kitanyoe Group Company, which currently supplies coal, gypsum, limestone and calcite to industrial users.
It said the end user there was expected to be a major cement manufacturer in Rwanda.
The up-to-3,000 tonnes per month contract was signed with a Ugandan company, Springwood Capital, with the expected end user being a Kampala-based steel works.
As with the Tanzanian agent, Springwood supplied limestone, gypsum, calcite and iron ore to consumers in Uganda and Kenya.
The Rwanda contract was of particular note to the project, Edenville said, as it had the potential to open up a major new transport route for its coal on Lake Tanganyika to both Rwanda and Burundi.
It described that route as both shorter than conventional truck transport, and more cost-effective, using low-cost barge transport.
Together, the two new contracts represented a supply of up to 9,000 tonnes per month, which accounts for around 75% of the current capacity of the recently-refurbished wash plant.
The new contracts would also complement the existing long-term contracts.
Progression of the supply arrangements remained dependent on the company securing sufficient operating capital to fund production, the board noted.
To that ned, discussions with the potential strategic investor in the project were said to be progressing, with the directors noting that a second investor had expressed interest in becoming involved with the company as a strategic shareholder.
It said that, while there was currently no certainty that the negotiations would lead to a successful outcome for Edenville, the board believed that the two coal new contracts increased the attractiveness of both the project and the company for potential investors.
Assuming sufficient working capital became available, the firm said it expected to be in a position to supply coal on an ongoing basis under the contracts before the end of the first quarter of 2020.
As it had previously reported, Edenville expected cash flow breakeven at Rukwa at around 4,500 tonnes of washed coal sold per month, and was targeting that by May 2020.
"I would like to acknowledge the project team's efforts, and particularly those of former CEO Rufus Short, for their groundwork and efforts in making these contracts possible," said chief executive officer Alistair Muir.
"The project has a significant advantage being the most northerly coal mine in the region by some 700 kilometres.
"I believe these contracts represent an important first step; now Rukwa has to deliver and assuming the required operational funds are secured we should see the mine and plant delivering as initially planned and our goal of becoming cash flow positive being realised."
At 1332 GMT, shares in Edenville Energy were up 13.23% at 0.037p.
1 Nov 2016 10:29