Aviva Corporation has sold its Mmamanstwe coal project in Botswana to fellow explorer African Energy Resources for $3.5 million.
Aviva said African Energy would acquire its wholly-owned subsidiary Botwsana Energy Solutions, which owns the rights to the Mmamanstwe mine for a payment of $3.5 million.
The deal remains subject to Aviva shareholder approval, due diligence on the project, African Energy arranging finance to fund the acquisition and binding sale documentation.
Aviva chief executive Lindsay Reed said the company bought into the project in 2007, and had identified a 1.3 billion tonne coal resource.
Mr Reed said the company had taken a hit on its investment in 2010, when a 1000 megawatt South African power project that was expected to take up a significant portion of the mine’s output was cancelled.
According to the company’s 2010 annual report, Aviva’s impairment losses from the Mmamanstwe project were just under $10.1 million.
“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,” Mr Reed said in a statement.
“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.”
At 10:30AM, Aviva Corporation shares were steady at 13 cents.