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African Energy will acquire all of the shares in Aviva’s wholly-owned subsidiary Botswana Energy Solutions for $A3.5 ($US3.6) million as part of the deal.
Mmamantswe Coal, which holds Aviva’s rights to the project, is a wholly-owned subsidiary of BES.
Aviva chief executive officer Lindsay Reed said: “Aviva and GDF Suez bid Mmamantswe into the South African power procurement program as a very competitive 1000MW integrated power project.
“When the procurement program was cancelled in 2010, the Aviva board wrote down its investment in Mmamantswe and has seen no cause to review its holding value.
“We believe the coal sector in Botswana will now be driven forward through a combination of smaller domestic power stations and access to export coal markets, for which a consolidation of resource ownership is required to drive infrastructure investment and unlock value.
“With that in mind, the board has positioned the project to be part of a scale-up of resources in Botswana and this transaction gives effect to that strategy. The sale price will increase Aviva’s cash position and we believe this is a good outcome for shareholders.”
The agreement is subject to approval of the transaction by Aviva shareholders at an extraordinary general meeting expected in June, and completion of due diligence by African Energy by May 3.
It also is conditional on Mmamantswe Coal being the registered holder of 100% of the licence under which the project is operated.
Mmamantswe Coal has the right to earn a 90% joint venture interest in the licence under a Heads of Agreement with Mawana Minerals and is in negotiations with Mawana to acquire 100%.
Other conditions include completion of a fundraising by African Energy to finance the acquisition of BES and execution of binding sale documentation.
Aviva became involved in the project in 2007 and identified a 1.3 billion tonne coal resource including a probable reserve of 895Mt.
It has completed several studies on the project and has carried out a major water drilling program. It announced in October that the environmental impact statement had been issued.
