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Capex on $6bn Mmamabula to vault Posted: Thu, 26 Jul 2007 [miningmx.com] -- THE $6bn Mmamabula coal and power project, backed by Toronto-listed CIC Energy, is expected to suffer more cost escalation having already announced a one fifth capex increase earlier this year. “We do expect the price tag will go up further,” said CIC Energy’s COO, Tore Horvei, in an interview at the Botswana Resources Sector Conference in Gaborone. “We’ll only know the final price when we have the engineering, procurement and construction (EPC) contract.” The first phase of the project will produce between 7.5 million and nine million tonnes of coal a year to supply a plant producing 2,200 megawatts to 2,400 megawatts. The bulk of this power will go to South Africa, and distributed by the Eskom power utility. Costs for all new energy projects are increasing, which is an important factor otherwise it would put CIC at a distinct disadvantage when vying for Eskom’s business. Estimations put southern Africa’s power needs at 2,000 MW a year for the next 20 years. “To put that into context, our project will give South Africa just over a year’s breathing space,” said Horvei. If South Africa’s economy continues growing at five percent, it will need 32,300 MW of power by 2025. “What is unique about this project is that there is a very strong market push. The timing is very good. If we do not act fast enough the window will close as Eskom starts to roll on its own projects,” Horvei said. CIC and its partner International Power are in the process of finalising which of two EPC contractors it will employ for the project in southwest Botswana on the South African border. In the next “couple of months” the decision will be made, Horvei said, which will allow the contractor to throw more engineers at the project and come up with a final costing. Once the final costing is in place power purchase agreements will be put in place with the Botswanan and South African power utilities. The partners will then finalise its project financing arrangements. Strong underwriting commitments are coming from South African financial institutions, Horvei said. A financial close should be achieved in the first quarter of 2008. “It’s tight, but doable,” he said. Eskom, which is under the gun to supply more electricity to a rapidly growing South African economy, will take the bulk of the power once the plant comes on stream in the first quarter of 2012. Botswana is to increase the size of its Morupule power station, which currently supplies 120MW of power against the country’s needs of 500MW. The plant will be expanded to 600MW by around 2010 and then doubling that again in the future. In theory this means Botswana’s power offtake from Mmamabula will be small at best. There are plans for a second phase at Mmamabula, which will replicate the size of the first phase, said CIC CEO Greg Kinross. CIC has put together an inhouse team to mine the coal. It is also aggressively exploring the coal deposit because it is investigating a coal-to-liquid fuel opportunity as well as exports of metallurgical grade coal to South African industries. There is a large area of good quality coal that falls outside the two-phase electricity project. A pre-feasibility study into the coal-to-liquid fuel project has started. CIC will emulate its power plant decision and bring in a major company to assist it on the project if it decides it is viable, Kinross said. “We’re not talking to anyone yet, it’s a bit too early,” he said. Click Here to subscribe to our daily newsletter
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