Riversdale Mining, a Sydney, Australia-based coal-miner with assets in Mozambique, has announced that it has signed a non-binding memorandum of understanding (MoU) with Chinese steelmaker Wuhan Iron and Steel Corporation (WISCO) for the development of the Zambeze coal project in Mozambique.
The MoU provides for the acquisition by WISCO of 40 percent of the project in Tete Province of Mozambique for a total consideration of US$800 million to be paid in three tranches and subject to achievement of certain milestones, including signing of definitive agreements, establishing the commercial viability of developing and operating the mine and acquisition of necessary permits. The deal values the total project at US$2 billion.
In addition, at the date of signing of the definitive agreements, WISCO will be issued eight percent of the ordinary shares in Riversdale Mining at an agreed price of AU$10 per share.
The Zambeze coal project is Riversdale's second Tier 1 coal project in the Moatize Basin and is adjacent to the Benga coal project, which is a joint venture with Indian steel producer Tata Steel. In May 2010, the coal resource estimate for Zambeze was upgraded to 9 billion mt, including about 2.3 billion mt of indicated and 6.7 billion mt of inferred resources.
WISCO will earn the right to purchase at least 40 percent of the coking coal produced from Zambeze, and the right to purchase at least 10 percent of the coking coal produced from the Benga project, in each case on market terms.
The MoU is non-binding, pending completion of definitive agreements within 120 days of signing the MoU.
Riversdale said that it has also signed a logistics partnership agreement with China Communications Construction Company for the development of the infrastructure of the Zambeze project.