TORONTO (miningweekly.com) - Shares in CIC Energy, hoping to build a coal mine and power station in Botswana, rose on Tuesday after the company agreed to sell a 9.1% stake to Geneva-based energy trader Vitol for C$10-million, or C$1.90 a share, representing a 79% premium to the company's closing price on the TSX the previous day.

The deal also gives Vitol the right to market 60% of any future export coal from the Mmamabula project, which CIC said could reach 20-million tons a year, provided a rail and logistics solution is found.

The Toronto- and Botswana-listed company said in December it was looking to sell a minority stake, after months of talks failed to find a suitable takeover offer.

CIC Energy's Mmamabula coal project has been in limbo since a proposed buyout by India’s JSW fell through in July 2011.

Regulatory setbacks in March last year regarding power purchases from South Africa also froze the large power station project the company was hoping to build that would supply electricity to Africa’s biggest economy.

Tuesday's announcement was the first good news CIC Energy's shareholders had received in a while, and the market responded positively, sending the company's shares 8.5% higher to close at C$1.15 – the highest level since February 8.

EYES EASTWARD

Mmamabula has a whopping 2.4-billion-ton coal resource, but this will remain largely sterilised unless a train can deliver it to a port.

The company had previously, along with other coal miners just south of the Botswana-South Africa border, embarked on a study to determine the merits of building a railway line to the Namibian coast in the west.

The deal with Vitol has apparently shifted the focus to exporting out of Mozambique, where the energy trader in January bought a 35% stake in Grindrod's Matola Coal Terminal.

CIC president Greg Kinross said this factor, combined with "positive developments" in South Africa regarding investments by parastatal Transnet Freight Rail in expanding capacity out of the Waterberg coalfields, just south of Mmamabula, bode well for the company.

“This could provide CIC Energy with the opportunity to export coal sooner than we had anticipated," he said in a statement.

The company also said it submitted a bid to build a 1 200 MW power station to supply South Africa with electricity, responding to a March 5 request for information from the government.

Talks with potential equity investors in the power proejct were also under way once more, noted CIC.