Ncondezi calls off joint development agreement with SEP

JOHANNESBURG (miningweekly.com) – Mozambique-focused coal miner and energy developer Ncondezi Energy will engage with new strategic partners who have expressed an interest in helping to develop its integrated thermal coal mine and 300 MW power plant in the country’s Tete province.

This comes after the company on Friday suspended exclusive discussions with Shanghai Electric Power (SEP).

The miner explained that its joint development agreement - which would have seen SEP inject $25.5-million to fund the balance of the power project development costs to financial close in return for a 60% shareholding in the subsidiary Ncondezi Power Holding 2 - had been called off owing to exclusivity arrangements with SEP having lapsed.

“The decision to suspend exclusive discussions follows more than three years of negotiations and work. The ongoing delays in funding are unsustainable and it is now in our best interests to suspend these discussions,” it said in a statement.

However, Ncondezi pointed out that it had already received indications of interest for an additional $350 000 shareholder loan, which is in the process of being finalised and documented and which would fund the company until September 2, when its existing shareholder loan becomes repayable.

The company's senior management deferred 50% of their salary between November 2016 and January this year and have deferred 100% of their salary since February. The management team have agreed to convert their deferred salaries into the shareholder loan, with the total amount expected to be $232 000. It would not attract any return.

COO Chris Schutte also resigned on Friday, but would remain on the board as a nonexecutive director.  Going forward, the finance function, financial adviser and Mozambican operations will report directly to and be actively managed by the board.

Initial feedback on a new funding partner is expected before the end of August.

The market reacted strongly to the negotiations being called off, with Ncondezi’s shares on the LSE down 41.18% on Friday.