Name and Location
Ncondezi coal project, Tete, Mozambique.

Client
Ncondezi Coal Company.

Project Description
The 38 700 ha Ncondezi licence area is located in the coal-bearing Tete province, one of the largest undeveloped coal mining regions in the world. The project has a total Joint Ore Reserves Committee-compliant resource of 4.7-billion tonnes.

The Ncondezi mine forms part of the 300 MW integrated thermal coal mine and power plant project, located near Tete. The power plant will be located about 90 km from the local transmission network and can be expanded to a capacity of up to 1 800 MW.

The Ncondezi mine will be an openpit operation, targeting production of 1.5-million tonnes a year of saleable product to the proposed mine mouth power plant, at an average yield of 92% and an average strip ratio of 0.61-billion cubic metres a tonne using contractor mining.

Net Present Value/Internal Rate of Return
Not stated.

Value
$376-million.

Duration
Mine commissioning is planned for the second half of 2016 to meet the power plant stockpile requirements ahead of its commissioning in the first half of 2018.

Latest Developments
Ncondezi Energy signed a nonbinding memorandum of understanding (MoU) with the Shanghai Electric Power Company (SEP) in October 2014, which that could result in SEP becoming the controlling shareholder of Ncondezi’s 300 MW power plant project and a minority shareholder in the Ncondezi mine project.

The agreement documents the parties’ mutual intention to further cooperate with each other and sets out a work plan and timetable to execute a legally binding joint venture agreement heads of terms (JVAHOTs) in the fourth quarter of the year.

Under the terms of the MoU, the JVAHOTs will outline a transaction whereby SEP acquires a controlling equity stake in the power project, as well as a minority interest in the associated Ncondezi mine project.

This investment structure remains subject to final due diligence by SEP and any changes will be documented in the JVAHOTs and announced when signed.

Following execution of the MoU, the parties will begin the negotiation of the JVAHOTs; a process that will run concurrently with the final due diligence process to be conducted by SEP to meet the fourth-quarter timeframe.

Ncondezi has agreed to provide SEP with a short period of exclusivity to agree the JVAHOTs.

The MoU is a significant step toward agreeing a transaction that will bring the Ncondezi power project to commercial realisation.

A binding agreement with SEP is now targeted for the first quarter of 2015.

Key Contracts and Suppliers
KPMG (mine feasibility study); Impacto and Environmental Resources Management Southern Africa (environmental- and social-impact assessment) and the Mineral Corporation (geological consultant).

On Budget and on Time?
Too early to state.

Contact Details for Project Information
Ncondezi Coal Company corporate development manager Hanno Pengilly, tel +44 20 7183 5402 or email info@ncondezicoal.com.