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ShazbotNaNuNaNu
Not sure about what paint you are talking about but given that this has been going for at least three years, I hope was long enough for any paint to dry, even in Tanzania.
In the meantime, with a year+ of no Mining licences issued, GoT lost many mlns of potential revenue. Only KIBO's contribution would have been 200k
Actually, probably a good thing for KIBO, as savings by not having the SML are quite substantial! Idelly the SML comes alongside the PPA, so minimise costs!
Deecay
Given that LC raised close to 3 mln in the last 7-8 months, I doubt he needs any cash urgently.
So postponing Sepco inv by a few months shouldn't be a problem.
Having said that, the SML can be issued very very soon! Judging by the updates on the portal!
bcl42
I had similar experience with him. I blame it on the UK education system in relation to STEM. My kids have been through it and I am appalled by their maths knowledge, despite them getting As.
Another quick hole (out of many in Lurker's points)
"...$60m pa is the average annual net cash flow after loan repayments for the whole 100% of the project. ie 20% gives Kibo an average annual share of $12m. "
WRONG. $60m is the average PRESENT VALUE of the net cashflows. At IRR, ie discount rate of 20%, the average over the life of the project is 1132 mln, as cashflows grow at 20% pa!
To make it even easier, if you were to put 1mln every year and the investments earn 20% pa, both accumulated and new money, at the end of the 25 year period, you won't have 25 mln but 471mln!!! Nearly 20 x more.
This is why Warren Buffet is so rich, it is called the effect of the COMPOUND INTERESR.
OK, no more free lessons. If anyone is interested I can run paid for session. Lurker, given your advanced age, I will give you special OAP discount!
I might just give a quick example, for the benefit of Lurker5, hopefully he understands this time.
If you have a project where you spend 100 (say 80 debt and 20 equity) and you get back 10 over 10 years, its NPV is ZERO (assume discount rate of ), just make it even simpler for Lurker5). Ie it means as equity holder, you are indifferent between investing and non investing.
Once you get positive NPV, it means you are making profit, ON TOP OF YOUR REQUIRED RATE OF RETURN!
Hope is clear, as I might have had a bit too much of the fine claret over lunch.
Lurker
You should brush up your knowledge of NPV.
By definition, it is the value created on top of all debt and equity investment, PAID BACK
So re your question:
"...He ends up with half the project but has paid $300m - as much as the whole project would have cost the seller - 'Bit of a chump don't you think ?"
So, for the 75 mln they pay for 50% of the project and they put in another 75mln as equity contribution, the investor gets 150 mln (50% of 300mln) + RETURN of the 75mln put in as equity, ie total return of 225 mln. All discounted at hefty 20%!
Quite a few mistakes further down in your very long post, but I'd rather go and have lunch than reply.
Foxy, spot on
Also let's not forget that the Ministry of Energy is well frustrated with Tanesco for dragging their feet working through the IPP PPA applications!
Hopefully they get something out by the end of the month. As directed by the Minister.
This can only help the case for coal, and hopefully pricing of it
https://edition.cnn.com/2018/08/21/politics/epa-climate-power-plants-trump-west-virginia/index.html
Wimbo
Or use TAZARA which is not far from the mine. And GoT is building a dry port in Mbeya!!
Actually, I think Kibo's coal can be profitable if exported, at current coal prices.
Just a quick calc
RB3 quality coal to produce - say $20 (with washing and sizing)
Transport to Mbeya dry port, another $10
Mbeya to Dar port - 500 miles at 5c/t/mile $25
So FOP price of $55 vs spot price of $90. I am sure LC would look into it, once he gets the SML
Wimbo
Spot on. Tancoal's CEO said in an interview recently that a 50km unpaved road from the mine to the sales point adds $9 to the price of transportation. Commercial tracks can't get to the mine, so they need to use smaller 10t trucks to take coal from the mine to the sales point.
Also depends on use. Usually power plants can burn anything where cement or ceramic industry might need more pure coal and/or sized.
I still find it interesting to see if EDL break even on the 5-10k t coal production. Tancoal do 50-60k a month and still can't break even. But they can be hugely inefficient or transport costs might be really high.
Tancoal mentioned recently that as commercial trucks can't get to the mine, this adds $9/t to the transport costs - ouch!
And a few further figures:
300mln of NPV, @20%, implies profit of 60mln pa.
Which ties in nicely with the 8 bln figure KIBO published as total revenues from 300 MW MCPP, 60 mln profit implies 300 mln of revenue (20% profit margin), hence 7.5 bln revenues over 25 years.
So if KIBO retains 50% of the project, that should mean 30 mln pa cash in KIBO's coffers. Just from the 300 MW MCPP. Obviously, Kibo has a few other energy projects, say up to 2000 MWs, you can do the maths.
In the meantime, anyone for SML tomorrow?
Lurker
Based on your figures, you need 150mln (25% of 600 mln build costs) to turn it into 300mln worth project valued at NPV, whcih itself is calculated at 20%, as you said.
So Kibo can sell half of the project, say at 50% discount to NPV (which is quite attractive) and get 75mln. Which is exactly its equity contribution.
Hence retain 50% of the project and get some really juicy cashflows over the next 25 years. Alternatively, sell further chunks, but at much lower discount rates as a few years down the line the project will be hugely derisked.
Wow, sounds quite good.
And them multiply it by 4. Even better
bigboffer
"...Please bear in mind though that the government could have given the SML at any point in recent years and chose not to."
Not quite - the application was made 30 Nov 2016, ie less than 2 yrs ago.
The ESIA was granted on 27 Oct 2017 and you can't have ML/SML without ESIA.
Also the President suspended ALL Mining licence applications in June 2017. The Mining Comm was launched only 3 months ago.
Issuance of ALL MLs/SMLs is restarting.
I hope this puts it into perspective.