Bushveld Minerals Limited (LON:BMN), a mineral project development company with a portfolio of vanadium and coal assets in Southern Africa and an investment in tin, today provided the following update about Lemur Holdings (“Lemur”). Lemur, Bushveld’s coal and energy subsidiary that is developing an integrated thermal coal mining and Independent Power Producer asset in Madagascar, has, through its Madagascan subsidiary Imaloto Power Project SARL, executed a binding Power Purchase Agreement (PPA) with Madagascar state-owned utility, Jiro sy Rano Malagasy (JIRAMA) as part of the Imaloto Power Project in Madagascar (“the Project”). The power plant will be located at the mine-mouth of Lemur Holdings’ coal deposit, which has approximately 136 million tonnes of coal. The addition of a power component will unlock the value of the coal asset, while at the same time securing reliable electricity off-take backed by a government entity.
Commenting on these developments, Fortune Mojapelo, CEO of Bushveld Minerals, said: “The signing of the Power Purchase Agreement with JIRAMA achieves a critical milestone in the development of Lemur’s integrated coal-to-power project. Coupled with the on-going progress on the project’s bankable feasibility study, and our recent strengthening of the Lemur management team, this achievement adds significant value to the project and brings it even closer to implementation.
Furthermore, this agreement delivers the anchor off-taker for the Imaloto Power Project in Madagascar. In addition to its established customer base, proven operational capability and existing mini-grid distribution infrastructure in the region, the agreement with JIRAMA secures the all-important support from the Government of Madagascar to provide reliable, base load electricity to the southern part of the island. This will allow for rapid commercial expansion of the power network in the country. On top of providing electricity, the project will bring additional coal mining jobs and revenue. We thank the management of JIRAMA and the Government of Madagascar for their support and, together with local stakeholders, look forward in continuing to develop the infrastructure and economy in the southern Malagasy region.”
Commenting on the project, Olivier Jaomiary, Chief Executive Office of JIRAMA, noted: “Since the Imaloto project uses coal which is a locally sourced fuel source for base load power, it will help reduce JIRAMA’s exposure to the volatility of imported fuels. In the long run, we believe it will help Madagascar to increase its generation capacity while providing a source of affordable electricity to end users. Overall, we expect the Project to help bring about economic development and create employment in Madagascar.”
Highlights:
· The PPA is for a period of 30 years, commencing in 2021 post construction;
· The PPA will be for an initial 10MW capacity, which is planned to increase in accordance with JIRAMA’s requirements;
· The project will provide significant developmental benefits to the region and over US$1billion in new fiscal revenue to the country over its lifetime;
· The PPA is based on the International Finance Corporation’s (IFC) guidelines for contracts of this nature in Madagascar. Given that this is the first project of its type in Madagascar, the agreement also contains provisions for lenders’ standard terms and conditions to ensure the bankability of the project;
· The signing ceremony of the landmark agreement, held in Antananarivo, was attended by Olivier Jaomiary, the CEO of JIRAMA, Bushveld Minerals Chairman, Ian Watson, local representative, Tom Cushman and Lemur Holdings CEO, Prince Nyati.
JIRAMA’s off-take is expected to increase in accordance with rising demand, starting with an initial 10MW of the nameplate 60MW capacity. For example, the current installed thermal generation capacity in the town of Tulear is already 15MW. Lemur has identified numerous communities and industrial users, located between the Imaloto Power Plant site and Tulear, which will demand an additional 30MW of generation capacity. Negotiations are already in process for off-take agreements with these users.
The significance of the PPA, however, far exceeds the size of the off-take. According to the laws of Madagascar, a PPA with a national utility is an essential pre-requisite for the development of an Independent Power Producer (IPP) project, especially the granting of generation licence, or concession. With JIRAMA as the anchor off-taker, Lemur is now able to build on this achievement with several private consumer PPAs. The project is also on track to complete a bankable feasibility in the first half of 2018.
The integrated project will act as an enabler for sustained electricity production for the population that has traditionally relied on subsistence or diesel power-based solutions. According to PowerAfrica, Madagascar currently has only 504 MW of installed generation capacity catering to 24 million people. The Imaloto Power Project is planned to grow this by nearly 12% in a region that currently has no power grid. Furthermore, the base load coal-fired power project would also look to attract industries to the area, especially since the project includes transmission lines reaching major parts of south-western Madagascar to connect the power plant with multiple, currently off-grid, communities. The integrated nature of the project will facilitate significant financial benefits to the country overall, including planned direct investment of nearly US$300 million and over US$1 billion to the national fiscus revenue over the project’s lifetime from royalties, taxes and other types of government revenue.
