AIM listed Edenville Energy plc, a company focused on developing a coal project in southwest Tanzania announced this morning that it has signed a contract with an East African industrial group for the supply of up to 4,000 tonnes of coal per month.
The contract has a duration of two years with the requirement that the coal supplied has a gross calorific value greater than 4,800 kCal/kg and pricing has been agreed based upon local commercial rates and calorific content. With Edenville’s mine having only produced 5,259 tonnes of washed coal between 25th May 2018 and the 9th of August 2018 this news is certainly significant. Edenville plans to meet the new demand through mine upgrades which are currently being undertaken.
Whilst this news is significant and should help Endenville’s mine to progress further for me the bigger prize lies in the company’s planned Rukwa Coal to Power Project. This project entails the construction of a coal fired power plant which will take coal directly from Edenville’s mine and convert it to electricity.
The project was given a major boost in late June when the World Bank approved a US$455m funding package for the Zambia Tanzania-Kenya power transmission line. This funding package allows the construction of high-voltage power infrastructure, which includes the transmission line from Sumbawanga to Tunduma and a substation near to Edenville Energies Rukwa Coal Project. This news was very positive for Edenville Energy as it allows them to develop their Rukwa coal to power project alongside the development of this new power line.
Edenville is currently loss making with the company posting a loss of £1,186,928 (0.11p per share) for 2017 a big improvement over 2016’s loss of £2,990,946 (0.50p per share). The company raised £740,000 through a placing at 0.35p in April 2017, the funds from this placing are earmarked for capital expenditure in connection with the enhancement of Edenville’s current mining activities with the aim of increasing production to fulfil current and potential orders. As I’m a naturally risk averse investor the current losses would put me off buying shares in Edenville at the moment, but the company is making good progress and they are certainly one to watch. If signs that the company is close to profitability start to appear, I would be tempted to take the plunge. With the market cap of Edenville sitting at £4.72 million if the company can reach profitability and progress it’s coal to power project the potential returns for shareholders are substantial, but until the company reaches profitability the risk of further dilution remains.