Much has been made over Kibo Mining’s (LSE: KIBO) joint development agreement with SEPCO III and it was a cause for celebration among private investors.
But here’s the thing.
Leaving the monumental tasks of completing the definitive feasibility study, the finalisation of due diligence, internal approvals and governmental approvals, construction work is expected to commence in Q2 of 2016, with completion and first power delivered into the grid, expected by Q1 2019.
That means that if all the engineering works go to plan and are on time we can expect revenues from the project to be recognised in the half yearly report of September 2019.
In regards to the 2019 revenues, Kibo stated that for a capital investment of between $46 million and $89 million, the project’s mining component annual coal sale revenues are estimated to be between $37 million and $44 million the profits from which they will have to share with SEPCO III.
What will be the operational costs?
This is a valid question since operational costs are killing Kibo’s earnings at present.
For the thermal power station component, the total capital cost is estimated at between $640 million to $760 million with no revenue projection included (indicative annual power generated of between 1,841 and 1,877 gigawatt hours per annum).
However positive an RNS sounds, nothing can substitute a business’ ability to properly commercialise it’s offering. Kibo has failed to do that and it’s projections for revenue are best guesses the calculations of which are opaque.
Perhaps the results of the definitive feasibly study scheduled to be completed by October 2015 will shed more light on the projects’ economic viability but as of now with placings the only thing keeping the lights on, Kibo Mining is bargepole stock.