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Edenville Energy PLC on Tuesday announced a new coal mining agreement in Tanzania which will yield a ‘low’ sales price for Rukwa coal versus international prices.
Edenville shares dropped 16% to 11.55 pence on Tuesday midday in London.
The deal with Brahma Energies Ltd, effective immediately, aims to secure production and sales of at least 4,000 tonnes of washed coal per month at Edenville's Rukwa coal project. It could rise up to 6,000 tonnes after two months, from around mid-October.
The agreement is set to last for 12 months but can be extended if both parties agree to it.
Edenville, the London-based developer of Tanzania's brownfield Rukwa coalfields, stated: ‘Brahma will take on full day to day operational management and control of the Rukwa mine, including all operational costs, with ultimate oversight continuing to be provided by Edenville.’ It added: ‘Brahma shall be responsible for the collection of any taxes and royalties from coal sales after month 2.’
Edenville expects a net target sale price of $35 to $50 per tonne of washed coal.
It said: ‘The current 'at gate' sales price range of $35 to $50 per tonne from Rukwa is low in comparison to international coal prices. However, this is before transportation costs, which are high given the remoteness of Rukwa. It also reflects the royalty regime within Tanzania, which includes the transport costs in its calculation.’
The company flagged that regional coal prices have risen over the last year and there is potential for further increases.
‘With a regular supply of washed coal, the company is optimistic it will be able to secure attractive market prices for domestic and regional sales,’ commented Chief Executive Officer Noel Lyons.
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