African Energy Resources' (ASX:AFR) shares may trade firmer after signing an agreement that could see it supply 300MW of base‐load electrical power from the Sese Coal & Power project into ZESCO's grid in southern Zambia.
The agreement is non-binding at this stage with Zambian electricity utility ZESCO Limited, and Maysen and Borowski Investments, an Australian corporate advisory firm.
Zambia is currently experiencing a period of strong economic growth centred on new mine and smelter developments in the Copperbelt.
Together with the expansion of several existing large-scale mines, this is leading to a substantial increase in demand for power.
The parties have agreed to explore the potential for the delivery of 300MW of base-load electrical power from AFR's Sese Coal & Power project into ZESCO's grid, 500 kilometres to the north of Sese.
AFR will undertake a desktop study to evaluate preferred options for the transmission and integration of 300MW of power supply from Sese into southern Zambia.
Preliminary studies have confirmed that there are no material flaws in the transmission options under evaluation.
ZESCO will provide access to its technical capability and information to assist with the study, and Maysen and Borowski will assist AFR and ZESCO in meeting key objectives.
Earlier this week, the company initiated a placement to raise up to $4.5 million through a placement and entitlements issue to advance its portfolio of coal and power projects in Botswana.
Major shareholder, Sentient Executive, will acquire a further 14.9 million shares in the placement, taking their ownership up to 19.9%.
The capital raising comprises a $1.5 million placement, and a $3 million non-renounceable entitlement, priced at $0.085 per share.
Notably, Sentient Group manages over US$2.7 billion in the development of metal, mineral and energy assets across the globe.
Their interest in $34 million capped AFR should not go unnoticed to Australian investors.
AFR directors are also showing confidence, purchase 2.4 million shares in the placement.
Landmark Infrastructure Developments
AFR's coal operations in Botswana stands to benefit from two major rail projects being developed, one designed to transport coal into South Africa for state-electricity generator Eskom.
The Transnet Freight Rail 105km heavy-haul coal rail link between Botswana and South Africa will commence construction next year as part of a R300 billion infrastructure investment program.
The line will be designed to carry 40-80 million tonnes per year to support the expected volumes from Botswana and the Waterberg coalfield in South Africa.
In addition, a Bilateral Agreement between Namibia and Botswana was signed last month for the construction of the 1,500km Trans-Kalahari Railway.
As part of this development, the Walvis Bay Commodity Terminal will be built to accommodate 65 million tonnes of coal annually.
These transport pathways will play a big part in unlocking the vast wealth of coal AFR controls in Africa.
Today's MoU with Zambian electricity authority, ZESCO continues the brace of news and momentum building from Sese and the case for medium term re-rating of AFR. The announcements indicate the role that AFR is likely to play in fuelling power hungry African continents.
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