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Tlou Energy announces operational report

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World Coal,

Tlou Energy has released its operational report for the quarter ending 31 March 2021.

Project finance

The company is seeking project finance to build infrastructure to connect the Lesedi power project to the existing electricity grid in Botswana. This infrastructure includes transmission lines, electrical substations as well as the installation of gas and solar generation assets.

Project finance discussions are at an advanced stage with a very reputable Botswana-based entity. Due to confidentiality, the company is unable to name the entity concerned at this time. However, it has confirmed that their investment committee and board have discussed the project financing and are favourably disposed to Tlou's proposal. They are now proceeding with a third-party technical review of the project as part of their due diligence process. Once this report is assessed an investment decision can be made.

The Lesedi project is proposed to be developed in two phases. Phase One involves transmission line construction, substations, grid connection, electricity generators and potentially the drilling of additional gas wells. The ~100 km transmission line will run from the Lesedi project to the town of Serowe where it will connect to the existing power grid. Initial generation is proposed to be up to 2 MW of electricity. Funding required for Phase One is approximately US$10 million which can be staged if necessary or prudent to do so.

Phase Two funding is for the expansion of electricity generation up to 10 MW. This will involve drilling gas wells and the purchase of additional electricity generation assets. The funding required for Phase Two is approximately US$20 million. Upon successful completion of Phase One and Two, the company plans to expand the project beyond 10 MW.

During the quarter, the company successfully raised gross proceeds of £2.625 million pursuant to the placing of 75 million new shares at an issue price of 3.5p per share. The funds raised are planned to go towards commencement of transmission line construction. While this work proceeds, Tlou will also continue its negotiations with other financiers for further development of the Lesedi project.

Boomslang Project – Environmental impact statement (EIS) approved

Botswana's Department of Environmental Affairs (DEA) has approved the EIS for Tlou's Boomslang project. The Boomslang Prospecting Licence PL011/2019 is located adjacent to the company's Lesedi power project.

All proposed project activities outlined under the EIS have been authorised. These include:

  • Drilling of core holes and stratigraphy boreholes.
  • Conducting seismic and geomagnetic surveys.
  • Pilot testing pods, monitoring wells and evaporation ponds.
  • Installation of pumping monitoring, gathering lines and evaluation equipment.

Tlou believes the Boomslang project can complement the more mature Lesedi and Mamba projects, particularly given the presence of the highly prospective Serowe coal seam. The Lesedi and Mamba projects primarily target the deeper Morupule coal seam.

EIS approval for exploration of the Boomslang permit (Tlou 100%) represents another key milestone for the company. Successful exploration and development of the Boomslang area could facilitate Tlou's longer term strategy of expansion beyond the current Lesedi project area.

Lesedi Project - commencement of development

The company plans to commence work on the development of the Lesedi project as soon as possible. Key stages to achieve first revenue are as follows:

  1. Construction of the transmission line to connect Lesedi to the existing power grid.
  2. Installation of substations at the Lesedi site and at Serowe to integrate with the grid.
  3. Installation of generation assets at Lesedi.
  4. Commissioning and testing.
  5. Sale of first power.

Following the recent capital raising, the company has funds in place to allow the transmission line construction to commence.

Transmission line tender

As outlined above, the first phase of development will be the construction of a transmission line to connect to the electricity grid. The line will be ~100 km in length with a 66 kV overhead cable. The route has been surveyed and full environmental approval is in place. The line will predominantly cross relatively flat, arid terrain with the last ~5 km being through the outskirts of the Serowe township.

The company had issued tenders for the construction of the transmission line and substations and post quarter end tenders were awarded to Zismo Engineering (Pty) Ltd for the construction of the overhead lines and to OptiPower for construction of substations at Lesedi and Serowe. The company looks forward to finalising the contracts with both groups and subsequent commencement of construction.

Power purchase agreement (PPA)

During the quarter, the company received correspondence from advisors assisting the government of Botswana in the execution of their coal bed methane (CBM) programme for the development of up to 100 MW of CBM fuelled pilot power plants.

The aim of this process is to secure a 10MW PPA between Tlou and the national energy utility, Botswana Power Corporation (BPC). The advisors have confirmed that they are reviewing project documents including the draft PPA. The company is focused on progressing this to a conclusion as soon as possible.

Forward plan

Key focus areas include:

  • Commence work on the transmission line infrastructure.
  • Finalise funding to advance the Lesedi power project towards initial electricity generation and first revenue.
  • Agree and sign a 10 MW power purchase agreement.
  • Progressing solar development plans.
  • Drilling additional gas wells in the Lesedi project.
  • Completing further operations across the Mamba and Boomslang project areas.

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