The AustralianChina's $1bn stokes coking coal dream Riversdale...

The Australian


China's $1bn stokes coking coal dream


Riversdale Mining's Steve Mallyon has signed a $1 billion-plus deal with the Chinese to develop a second coking coal mine in Mozambique.

The ambitious managing director wants Riversdale to become the world's biggest producer, overtaking BHP Billiton's Queensland joint venture with Mitsubishi.

"We are positioning Riversdale to be the major player in the coking coal world," Mr Mallyon said yesterday after signing a deal to give Wuhan Iron & Steel Corporation (WISCO) a 40 per cent stake in the Zambeze coal project.

"Not in the next two or three years, but over the next 10."

The company got a start on those ambitions yesterday when WISCO signed a non-binding memorandum of understanding that would see it pay $US800 million ($916m) for a 40 per cent stake in Zambeze, pending mining approvals.


It also agreed to take an 8 per cent stake in the company through a share placement for about $160m after a definitive agreement had been signed.

WISCO has also committed to help Riversdale secure finance and Riversdale has also secured a logistics and infrastructure partnership agreement with China Communications Construction Company.

"It's a fantastic deal," Hartley's analyst Andrew Muir said. "The Mozambique coal operations have been heavily reliant on infrastructure and by teaming up with CCCC they can get things like ports and barges in place."

The deal with WISCO would help get finance in place, reduce the share of an expected $2.3bn capital spend Riversdale would have to foot, and provide funds to pay its share of development costs, Mr Muir said.

The deal needs to be made binding in the next 120 days for it to stand, at which point Riversdale will receive $US200m from WISCO.

A second payment of $US150m will be made on completion of a feasibility study showing the mine can produce 30 million tonnes of mined coal a year, which analysts expect to translate to about 20 million tonnes of saleable coal.

The final $US450m would be paid on awarding of mining and environmental approvals.

Mr Mallyon said Zambeze had a resource of 9 billion tonnes of coal, allowing the potential to triple the size of the mine.