Aviva Corporation Ltd says it has entered into a conditional agreement with African Energy Resources Limited to sell its Mmamantswe Coal Project to the company.
Subject to the satisfaction of certain conditions precedent, African Energy will acquire all of the shares in Aviva’s wholly-owned subsidiary Botswana Energy Solutions Limited (BES), for a payment of A$3.5 million. Mmamantswe Coal (Proprietary) Ltd (Mmamantswe Coal), which holds Aviva’s rights to the Project, is a wholly-owned subsidiary of BES.
The deal is subject to approval Aviva shareholders under the ASX Listing Rules at an extraordinary general meeting expected to be convened in June and also the completion of due diligence on the Project by African Energy by 3 May 2013. Equally, Mmamantswe Coal will need to be the registered holder of 100% of the license under which the project is operated.
At the moment, Mmamantswe Coal has the right to earn a 90% joint venture interest in the License under a Heads of Agreement with Mawana Minerals, and is currently in negotiations with Mawana to acquire 100% of the license. For the transaction to go ahead, African Energy should complete the fundraising to finance the acquisition of BES; and also the execution of binding sale documentation.
Aviva became involved in the project in 2007 and identified a 1.3 billion tonne coal resource including a probable reserve of 895 million tons. Aviva has completed several studies on the Project and has carried out a significant water drilling program. Aviva announced in October 2012 that the Environmental Impact Statement for the Project has been issued.
Aviva’s Chief Executive Officer Lindsay Reed said Aviva and GDF Suez bid Mmamantswe into the South African power procurement program as a very competitive 1000MW integrated power project.
“When the procurement program was cancelled in 2010, the Aviva board wrote down its investment in Mmamantswe and has seen no cause to review its holding value. We believe the
coal sector in Botswana will now be driven forward through a combination of smaller domestic power stations and access to export coal markets for which a consolidation of resource ownership is required to drive infrastructure investment and unlock value,” said Reed.
“With that in mind the board has positioned the project to be part of a scale up of resources in Botswana and this transaction gives effect to that strategy. The sale price will increase Aviva’s cash position and we believe this is a good outcome for shareholders.”
Aviva is in the process of finalising the relevant shareholder meeting documentation and will continue to keep shareholders appraised regarding the satisfaction of the conditions precedent to the transaction.
African Energy is listed on the Australian Securities Exchange and the Botswana Stock Exchange and is a mining and energy development company with offices in Botswana, Zambia, Perth and Guernsey. African Energy has coal projects in Botswana and Zambia, including the flagship Sese Coal & Power Project that contains over 2.6 billion tonnes of thermal coal of which over 650Mt are in the Measured Resource category.
African Energy is currently developing the Sese Integrated Power Project, with an initial 300MW power station planned to commence generation in 2016, and the Sese Export Project to supply thermal coal to Asia. Aviva on the other hand is a resource development company listed on the Australian Securities Exchange and the Botswana Stock Exchange, with its head office in Perth.
