Tlou Announces Operational Report - Quarter Ending 31 March 2021

Source: 4/26/2021, Location: Africa

Tlou Energy Limited is an ASX, AIM and BSE listed company focused on delivering power in Botswana and southern Africa through the exploration and development of gas and solar. The Lesedi Power Project ("Lesedi") is the Company's most advanced project. Tlou plans to develop gas and solar power generation assets at Lesedi with the sale of electricity into the regional power grid. In addition, the Company has two large exploration areas designated Mamba and Boomslang.

Project Finance
The Company is seeking project finance to build infrastructure to connect the Lesedi power project to the existing electricity grid in Botswana. This infrastructure includes transmission lines, electrical substations as well as the installation of gas and solar generation assets.

Project finance discussions are at an advanced stage with a very reputable Botswana-based entity. Due to confidentiality the Company is unable to name the entity concerned at this time. However, we can confirm that their investment committee and board have discussed the project financing and are favourably disposed to Tlou's proposal. They are now proceeding with a third-party technical review of the project as part of their due diligence process. Once this report is assessed an investment decision can be made.

The Lesedi project is proposed to be developed in two phases. Phase One involves transmission line construction, substations, grid connection, electricity generators and potentially the drilling of additional gas wells. The ~100 Km transmission line will run from the Lesedi project to the town of Serowe where it will connect to the existing power grid. Initial generation is proposed to be up to 2MW of electricity. Funding required for Phase One is ~USD $10m which can be staged if necessary or prudent to do so.

Phase Two funding is for the expansion of electricity generation up to 10MW. This will involve drilling gas wells and the purchase of additional electricity generation assets. The funding required for Phase Two is ~USD $20m. Upon successful completion of Phase One and Two, the Company plans to expand the project beyond 10MW.

During the quarter, the Company successfully raised gross proceeds of £2.625 million pursuant to the placing of 75,000,000 new shares at an issue price of 3.5 pence per share. The funds raised are planned to go towards commencement of transmission line construction. While this work proceeds, Tlou will also continue its negotiations with other financiers for further development of the Lesedi project.

Boomslang Project - Environmental Impact Statement (EIS) Approved
Botswana's Department of Environmental Affairs (DEA) has approved the EIS for Tlou's Boomslang project. The Boomslang Prospecting Licence PL011/2019 is located adjacent to the Company's Lesedi power project.

All proposed project activities outlined under the EIS have been authorised. These include:
· Drilling of core holes and stratigraphy boreholes;
· Conducting seismic and geomagnetic surveys;
· Pilot testing pods, monitoring wells and evaporation ponds; and
· Installation of pumping monitoring, gathering lines and evaluation equipment.

Tlou believes the Boomslang project can complement the more mature Lesedi and Mamba projects, particularly given the presence of the highly prospective Serowe coal seam. The Lesedi and Mamba projects primarily target the deeper Morupule coal seam.

EIS approval for exploration of the Boomslang permit (Tlou 100%) represents another key milestone for the Company. Successful exploration and development of the Boomslang area could facilitate Tlou's longer term strategy of expansion beyond the current Lesedi project area.

Lesedi Project - Commencement of Development
The Company plans to commence work on the development of the Lesedi project as soon as possible. Key stages to achieve first revenue are as follows:
1. Construction of the transmission line to connect Lesedi to the existing power grid
2. Installation of substations at the Lesedi site and at Serowe to integrate with the grid
3. Installation of generation assets at Lesedi
4. Commissioning and testing
5. Sale of first power

Following the recent capital raising, the Company has funds in place to allow the transmission line construction to commence.

Transmission Line Tender
As outlined above, the first phase of development will be the construction of a transmission line to connect to the electricity grid. The line will be ~100 Km in length with a 66kV overhead cable. The route has been surveyed and full environmental approval is in place. The line will predominantly cross relatively flat, arid terrain with the last ~5 Km being through the outskirts of the Serowe township.

The Company had issued tenders for the construction of the transmission line and substations and post quarter end tenders were awarded to Zismo Engineering (Pty) Ltd ("Zismo") for the construction of the overhead lines and to OptiPower for construction of substations at Lesedi and Serowe. The Company looks forward to finalising the contracts with both groups and subsequent commencement of construction.

· Zismo is a Botswana-based Electrical Engineering, Contracting, Automation and Refurbishment Company.
· OptiPower is a division of Murray & Roberts Ltd. Based in South Africa, OptiPower's core business includes the construction of substations, power lines and fibre optic networks.

10MW Power Purchase Agreement (PPA)
During the quarter, the Company received correspondence from advisors assisting the Government of Botswana in the execution of their Coal Bed Methane (CBM) program for the development of up to 100MW of CBM fueled pilot power plants.

The aim of this process is to secure a 10MW PPA between Tlou and the national energy utility, Botswana Power Corporation (BPC). The advisors have confirmed that they are reviewing project documents including the draft PPA. The Company is focused on progressing this to a conclusion as soon as possible.

Other items
Orapa Gas Supply Tender
Botswana Power Corporation has issued a tender for the supply and delivery of natural gas to the Orapa 90MW power plant. The power plant provides power to the Orapa diamond mine - one of the largest diamond mines in the world. Orapa is currently running on intermittent grid power and emergency diesel generation. Anglo American PLC, owner of the De Beers group and co-owner of Orapa along with the Government of Botswana, has publicly stated their objective to move to cleaner fuel sources.

Gas from Tlou's nearby discoveries could be ideally suited to assist with meeting their cleaner energy objectives. The Company will review the tender documentation and subject to meeting the eligibility criteria, plan to submit a response. The tender closes in May 2021.

The Company is looking into the potential of using gas and solar to produce Hydrogen power. These early-stage plans may lead to a trial project hosted at the Company's field operations in Botswana.

Forward plan
Key focus areas include:
· Commence work on the transmission line infrastructure
· Finalise funding to advance the Lesedi power project towards initial electricity generation and first revenue
· Agree and sign a 10MW power purchase agreement
· Progressing solar development plans
· Drilling additional gas wells in the Lesedi project
· Completing further operations across the Mamba and Boomslang project areas

Project Areas
The Company has three project areas in Botswana:
· Lesedi Project - Gas & Solar Development, Exploration & Evaluation
· Mamba Project - Exploration & Evaluation
· Boomslang Project - Exploration & Evaluation

Lesedi Project Area, Botswana
Licences: Mining Licence 2017/18L, Prospecting Licences 001 & 003/2004 and 35 & 37/2000
Ownership: Tlou Energy Limited 100%

The Lesedi project covers an area of approximately 3,800 Km2 and consists of four Coal and Coal Bed Methane (CBM) Prospecting Licences (PL) and a Mining Licence. The Mining Licence area is currently the focal point for the Company's operations and includes the Lesedi production wells or 'pods'.

The Lesedi project is the Company's most advanced project. Plans are in place to purchase land at the Lesedi project, install solar photovoltaic (PV) panels and gas-fired electricity generators and connect to the power grid in Botswana. The project has full environmental approval which includes gas extraction, electricity generation and construction of transmission lines. In addition, the Company has approval for 20MW of solar generation. CBM power is ideal for use in conjunction with solar projects. A generation licence has also been granted by the Botswana Energy Regulatory Authority (BERA). This licence has a 15-year term and is valid for both solar and gas-fired generation.

Tlou's mining licence is required by an operator to develop a CBM asset. This licence spans a large 900 Km2 area and is valid until 2042.

Tlou has the only independently certified CBM gas reserves in Botswana, with 252 Billion Cubic Feet (BCF) of 3P gas Reserves certified in the Lesedi project area. In addition, the 3C Contingent Gas Resources are approximately 3 Trillion Cubic Feet (TCF).

Initial development of the Lesedi project is planned to be up to 10MW of power. With plans for solar and gas fired power, these can be standalone operations or a hybrid solution with gas-fired power able to provide back-up power when solar is not available. The location of the Central Processing Facility (generation site) at the Lesedi project is approximately 100 Km from the electricity grid and the Company is planning to construct a 100 Km transmission line to connect to the grid.

The proposed off-taker (purchaser) of the power generated by Tlou is BPC. The Company has signed a PPA with BPC for the first 2MW of electricity and a submission has been made to secure a PPA for up to 10MW.

Mamba Project Area, Botswana
Licences: Prospecting Licences 237-241/2014
Ownership: Tlou Energy Limited 100%

The Mamba project consists of five Coal and CBM prospecting licences covering an area of approximately 4,500 Km2. The Mamba area is situated adjacent to Tlou's Lesedi project and is on-trend with the asset that has produced the encouraging results observed to date. In the event of a gas field development by Tlou, the Mamba area provides the Company with flexibility and optionality.

Independently certified 3P Gas Reserves of 175 BCF are already in place at the Mamba project. The Mamba project is in the exploration and evaluation phase with further operations required on these licences. The next stage of development is likely to be core-hole drilling and a seismic survey of the area. Positive results from these operations could expand the reserves footprint across the Mamba project area.

The Mamba area has the potential to become a separate revenue generating development project in addition to the proposed development at Lesedi, with solar and gas-fired generation a possibility subject to approvals. Geographically, the Mamba project area is approximately 50 Km closer to the Orapa Power station compared to the Lesedi project area. The potential exists for a gas pipeline to be constructed to supply gas from the Mamba project to the 90MW Orapa power station.

Boomslang Project Area, Botswana
Licence: Prospecting Licence 011/2019
Ownership: Tlou Energy Limited 100%

Prospecting Licence, PL011/2019 designated "Boomslang", is valid for an initial term of 3 years. The licence area is approximately 1,000 Km2 and is situated adjacent to the Company's existing licences. The Boomslang area is also located on-trend with the asset that has produced the encouraging results observed to date at the Lesedi project.

The Boomslang licence area provides the Company further flexibility and optionality for development of different projects.

There have been no ground operations completed in the Boomslang area as the Company only received environmental approval to commence exploration activities during the quarter. Subject to funding, initial exploration work is planned for this area. Like the Lesedi and Mamba areas, the Boomslang project could produce solar and gas-fired power.

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