CIC Energy’s flagship project, the Mmamabula Energy Project (MEP), is a 1200 megawatt (net) capacity power station and integrated coal mine project in Botswana that is planned to provide power mainly to South Africa. The MEP is the most advanced independent power producer (IPP) project that can meet the urgent demand for new baseload capacity in South Africa in the near term.  It will be the largest single private sector investment ever to take place in Botswana.

In December 2009, CIC Energy suspended all development activities for the MEP unrelated to the regulatory approval process in South Africa, after South Africa’s first integrated resource plan (IRP1) was made public and unexpectedly did not cover the time period relevant for the MEP.  The Company anticipates recommencing development activities on this project once South Africa’s second integrated resource plan (IRP2) is completed in 2010, as this plan is expected to cover a 20-year timeframe.

In the interim, no target date has been set for the signing of project loan agreements (Financial Close) or the commencement of construction for the MEP, as the time frame for the regulatory approval process in South Africa is uncertain.

In August 2009, Electricity Regulations On New Generation Capacity were published by South Africa’s Department of Energy.  These new regulations changed the decision maker on Power Purchase Agreements (PPAs) with IPPs. Now the Government of South Africa (Minister of Energy and Minister of Finance together) rather than Eskom Holding Limited is the decision maker. The first step of the approval process is to have the IPP project covered in an IRP.

CIC Energy announced in March 2009 that it had signed a contract with Shanghai Electric Group (SEC) as the engineering, procurement and construction (EPC) contractor for the MEP power station.  Commercial operations are expected four years after the signing of definitive loan agreements (Financial Close).

Also in March 2009, CIC Energy submitted formal bids for PPAs to Eskom and Botswana Power Corporation, the expected electricity offtakers for the MEP. In July 2009 Eskom responded indicating that it could neither accept nor reject CIC Energy’s bid.

The project financing for the MEP, which is being led by NM Rothschild and Sons Limited, is expected to be 80% debt and 20% equity.  CIC Energy is in discussions with potential partners to take an equity stake in the MEP.

Debt financing is expected to come from three sources:

• Development Finance Institutions (DFI) with a mandate to fund projects in developing countries (examples of DFIs include Industrial Development Corporation of South Africa Limited, Development Bank of Southern Africa Limited, IFC and African Development Bank)

• Certain export credit agencies like the Export Credit Insurance Corporation of South Africa (Pty) Ltd (ECIC) and export facilitation banks like the Export-Import Bank of China

• South African and other commercial banks

CIC Energy anticipates signing definitive loan agreements, or Financial Close, for the MEP as soon as practicable following the completion of the second integrated resource plan by the Government of South Africa.

Future milestones for the MEP are:

• Conclude PPAs and other project agreements including those with the Government of Botswana
   
• Issuance of mining, power generation and other licences
   
• Commence the procurement process for the construction of the first coal mine
   
• Begin site preparation and other pre-construction work
   
• Signing of definitive loan agreements or Financial Close
   
• Start of construction for the power station and coal mine

All technical feasibility studies have been completed on the Mmamabula Energy Project and total investment by CIC Energy in the Mmamabula Energy Project is more than C$100 million.
MEP Feasibility studies include:

• Snowden & CIC Energy’s Mining Team - NI 43-101 compliant mineral resource estimates
   
• CIC Energy’s Mining Team - Mineral resource modeling & mine planning
   
• Environmental Resources Management (ERM) and Digby Wells and Associates for  Groundwater and Environmental Studies, and Gibb Africa  - Surface Water Studies
   
• Dowding, Reynard and Associates (Pty) Limited (DRA) - Mine beneficiation plant designs
   
• Aurecon  and DRA - Design of common infrastructure

Advisors to the Mmamabula Energy Project include:

• Project Legal Counsel, International: Clifford Chance, Local: Edward Nathan Sonnenberg
   
• Lenders Legal Counsel, International: Shearman & Sterling, Local: Webber Wentzel  Bowens
   
• Parsons Brinckerhoff (PB Power) -  owner’s engineer
   
• NM Rothschild and Sons Limited - project financial advisors
   
• Absa Capital, Standard Bank and Bank of China - mandated lead arrangers  

CIC Energy must obtain a power generation licence and a mining licence from the Government of Botswana for the MEP. The Company announced in January 2008 that new legislation to amend the country’s Mines and Minerals Act and Electricity Supply Act received approval from the Government of Botswana cabinet and passed the third and final Parliamentary reading.  This new legislation facilitates the MEP. In February 2008, these bills became law following Presidential approval and gazetting. 

CIC Energy has completed the final mine plan for the Serorome Mine in the Central Block at the Mmamabula Coal Field intended to supply the MEP power station.  The planned capacity for this coal mine will be approximately 4.5 million metric sales tonnes per annum.  In December 2008 CIC Energy submitted an application for a mining licence to the Government of Botswana. This application remains pending.

Environmental approvals for the amended Environmental Impact Assessment (EIA) studies that reflect a 1200 megawatt (net) power station and mine from the Government of Botswana are pending. Environmental approvals are a prerequisite for the granting of a mining licence, a power generation licence, and surface rights at Mmamabula, as well as the acquisition of transmission line and other necessary servitudes in Botswana.  Full environmental approvals for the previously proposed 2100-2400 megawatt power station and mine had been received in 2007. 

The MEP is being developed in accordance with the Equator Principles, a voluntary set of guidelines based on the International Finance Corporation’s (IFC) environmental and social standards. The IFC is the private sector arm of the World Bank Group and these standards are considered best practice for projects in developing countries.

- May 2010-