Sese Joint Venture Project
First Quantum Minerals Ltd (FQML) became a majority equity partner at the Sese Joint Venture in 2014 and have since directly invested AUD $15m for a 65% project interest and committed to invest a further AUD $3m to increase its stake to 75%. Once this 75% interest has been earned, FQML is responsible for arranging the funds required to build the Sese integrated power project and will loan carry African Energy’s residual 25% interest through to commercial production.
Over the last few years, AFR and FQML have completed several technical studies covering mining, coal preparation and power generation. A conceptual study of the proposed power station layout and design has determined that Sese coal is a suitable fuel for all common power station boiler technologies and can readily meet the required air quality and emissions standards set in the environmental approvals for the project.
These studies have also established the operating costs, capital costs and a robust financial model for a 450MW power project and the associated coal mine and coal processing facilities and have demonstrated that power from Sese could be delivered to the Zambian Copperbelt where FQML operates a large copper mining and smelting business.
The project has secured the majority of licences, permits and stakeholder approvals that are required for such an operation including:
- A large-scale mining licence has been granted for an initial period of 25-years over an area of approximately 51 km2 which contains 650Mt of coal in Block-C.
- A Development Approval Order which sets the fiscal framework for the project, including a 5-year tax holiday from the commencement of commercial operations followed by a 15% corporate tax rate.
- Land Rights and an associated 50-year Land Lease Agreement.
- Water extraction rights from Shashe Dam.
- Environmental approval for the project, which was recently increased to 500MW of power generation and the associated coal mining and coal processing volumes.
- Implementation of the resettlement action plan (RAP) around Sese, under which 25 households have to date had their grazing rights, water bores and access trails relocated to outside the Land Rights Lease. Resettlement of a further 3 households is required to complete this process, which has been jointly monitored by Sese JV staff and the Tonota Land Board.
The Sese JV has now secured most of the licenses and permits required to develop an integrated coal and power project in Botswana, with the one major exception being a Generation and Export Licence, which is currently being negotiated with Botswana’s energy regulator.
The current project development plan contemplates an initial 225MW Unit which will deliver 100MW of electricity into Zambia for use by FQML, with the balance sold to a credit worthy third party or parties. This will require at least two Power Purchase Agreements (PPA’s), one with FQML for 100MW, and one for the balance.
A draft PPA between the Sese JV and FQML has been drawn up, and the project is in discussions with several parties for one or more PPA’s to cover the residual balance. A second 225MW Unit can be considered if suitable demand and an associated PPA can be established.
In addition to securing the PPA’s, the main remaining commercial documents required for the project include Grid Connection, Transmission, and Use of System agreements with the power utilities in Botswana, Zimbabwe and Zambia.