Kibo attracting believers

Shares in Kibo Mining made an extraordinary leap in one day in mid-September gaining 133% an improvement of such scale as to suggest the London- and Johannesburg-listed gold and energy company has attracted some believers within the investment parish.

On a 12-month return basis, the gains in the company’s shares have been ever better, appreciating more than 300%, which is another positive signal that the share is not responding to short-term zealous enthusiasm. But why the improvement?

The reason is Kibo’s energy play i East Africa’s Tanzania is starting to gather traction. Firstly, it has the support of the Tanzanian government, which has made Kibo’s Rukwa coal and power station ambitious part of its own infrastructural plans.

In fact, East African power generation is becoming something of an investment theme. According to a report by Hume Capital Investment Research, Tanzania has available capacity of between 700MW to 800MW, of which roughly 60% is thought to be reliable power.

Given that power demand is expected to grow to over 2 000MW by 2020, “the country does not have enough capacity to satisfy its current consumption levels let alone future demand growth,” said Hume Capital analyst Matthew MacDonald.

According to Louis Coetzee, CEO of Kibo, sufficient power generation in Tanzania would take GDP growth to the double digits, not just the 8% growth it recently recorded.

Second, a mine plan for Rukwa has proved up a viable coal mine that can also support a 600MW power station if Kibo elects to go that route.

If further proof is needed of why it’s important to have Tanzanian state support, then look no further than a coal supply agreement and terms for frame of reference in the power plan.

Third, Kibo has won the interest of several potential joint-venture partners of the power station construction, which will be crucial in helping to finance the power station and mine, estimated by Coetzee to cost between $500m and $700m.

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