African Energy acquires 2.4 billion tonne Mmamabula West Coal project

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African Energy Resources, the BSE listed company, says a deal is in place to acquire Mmamabula West Coal project in south east Botswana to increase its coal asset in the country known to have large reserves in the continent.

In an update to shareholders, the company said together with Asenjo Energy, it has executed a binding sale agreement to acquire 2.4 billion tonne project for a cash consideration of US$ 2.5 million.

“African Energy will pay an initial USD $1 million to Asenjo once the transfer of title of the relevant prospecting licence has been approved, and a further USD $1.5 million once a retention licence has been granted over the project,” it revealed.

However, the agreement terminates if this condition is not met by 31st December 2013, unless extended by mutual consent.

African Energy will be responsible for the completion of the required work programmes on PL56/2005 to allow the company to submit an application for a Retention Licence over the area of the prospecting license by 30, March 2014. Retention License is valid for three years, and can be renewed once for a further three year period.

On completion of the transaction, African Energy will have increased its total in‐situ resources to 6.2 billion tonnes of thermal coal in Botswana.

“African Energy believes that this preferred area from within the Indicated Resource could form the basis of a stand‐alone underground export coal mine. Further, more detailed work, including infill drilling, coal processing studies, mining studies and financial modelling are required to validate this,” the company said.

The Mmamabula West Coal Project is approximately 100km north of Gaborone, and 50km west of the railway line between Gaborone and Francistown. The project has been delineated by 87 holes drilled by Asenjo between 2008 and 2011, plus 52 historical drill holes drilled before 2006.

The project contains 892Mt of Indicated Resource and 1,541 Mt of Inferred Resource at an average in‐situ raw CV of 4,800kcal/kg (20.1 MJ/kg) and the majority of the coal occur in two coal seams which are 4‐6m thick and 100‐150m below surface.

African Energy added that a preferred area of approximately 25km2 within the Indicated Resource contains higher quality coal that can produce a 6,100 kcal/kg export product at yields of 75%.

“This preferred area requires further detailed studies to confirm its potential for an underground export coal mine.”

Asenjo Energy is the Botswana trading name of African Energy (Botswana) Pty Ltd, a company which was incorporated in Botswana in 2007. Asenjo Energy was formed to explore and develop multiple coal projects in Botswana, including the Mmamabula West Project.

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