Riversdale agrees $800m China deal for Mozambique mine

24th June 2010 By: Esmarie Iannucci - Creamer Media Senior Deputy Editor: Australasia

PERTH (miningweekly.com) – Australia-listed Riversdale Mining has agreed to jointly develop its Zambeze coal project with China’s Wuhan Iron & Steel Corporation (Wisco), in a transaction that values the Mozambique mine at $2-billion.

Wisco could acquire a 40% interest in the Zambeze project for $800-million, and would be issued an 8% shareholding in Riversdale at an agreed price of A$10 a share.

The Chinese steel group would have the right to buy 40% of the coking coal produced from the Zambeze project, which has a nine-billion ton resource, and at least 10% of the coking coal produced from the nearby Benga coal mine.

Zambeze is Riversdale’s second coal project in the Moatize basin and is adjacent to the Benga mine, which will start production early next year. 

The Australian company also agreed a logistics deal with China Communications Construction Company (CCC).

The memorandum of understanding covered the facilitation by Wisco, CCCC and other Chinese companies, of a comprehensive study of mine-to-ship logistics to enable the export of large tons of coal products from the Zambeze project to ports for export markets.

“Through our Chinese venture partners, we gain funding to develop the mine and a buyer for part of Zambeze’s offtake. We also gain access to world-class mine-to-ship logistics and infrastructure expertise to facilitate the export of the mine’s coal products,” said Riversdale executive chairperson Michael O’Keeffe.

He said in a statement that the key to unlocking the potential of the Zambeze coal project was the ability to deliver efficient coal handling logistics and infrastructure.

“We are extremely pleased to have both the Chinese steel business Wisco and the infrastructure group CCCC as part of the consortia working with us to develop, build and deliver coal from Zambeze.”

THREE TRANCHES

Under the agreement, Wisco would pay the $800-million in three tranches.

The first $200-million would be paid upon the completion and signing of a definitive agreement covering the joint venture.

A further $150-million would be payable on the successful completion of a feasibility study for Zambeze, subject to meeting certain milestones, including establishing the commercial viability of developing and operating the Zambeze project to produce no less than 30-million run-of-mine tons of coal a year.

A further $450-million would be payable on the granting of the mining contract, mining licence, final environmental approval and other necessary regulatory approvals required to proceed with the development of the project.