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 Joint Ore Reserves Committee-compliant coal resource amounts to 4.7-billion tons, permitting a large and long operation. The Phase 1 power plant will use Mozambique’s present transmission network, reinforced, to carry its output to consumers. Only about 20% of the country is currently electrified and the acceleration and expansion of electrification have become government policy.

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 has entered into a binding joint development agreement (JDA) with China’s Shanghai Electric Power Company (SEP) to develop the Ncondezi coal mine and thermal power station project. The deal has resulted in SEP becoming a strategic investor in the Mozambique project.

As a result of the agreement, a holding company will be established which will hold 100% of the project – this will be the Ncondezi Power Company (NPC). Currently, Ncondezi Energy directly owns 100% of the project. SEP will own 60% of the NPC. In return, SEP is investing up to $25.5-million in the development of the project up to financial close. This will be paid, in agreed instalments, between January 1 and financial close. The first instalment will be paid when the JDA becomes effective and certain SEP conditions are met. Following financial close of the project, the NPC will pay Ncondezi Energy another $35-million.

The deal between Ncondezi Energy and SEP will also result in a change in the technology to be used for the power plant. Originally, the British company planned to use circulating fluidised-bed (CFB) technology but now the power plant will employ pulverised coal (PC) technology. This is because of SEP’s expertise regarding coal-fired power stations. This change is founded on a revised feasibility study carried out by the Chinese company.

“The PC technology feasibility study demonstrates comparable economic returns to the CFB solution and supports the existing tariff envelope agreement with EDM – the Mozambique electricity utility,” Ncondezi Energy has said.

One of SEP’s investment conditions is that EDM approves the change to PC technology and confirms its existing commercial agreement with Ncondezi.

Once SEP’s investment conditions have been met – or have been waived by the company – it will take control of the project. “Appropriate corporate governance and minority protections will be incorporated into a detailed shareholders agreement,” Ncondezi Energy has assured.

“SEP has undertaken to [make] reasonable endeavours to procure the best possible commercial terms from Chinese financiers for the proposed debt-financing facilities for the power project on a nonrecourse basis to Ncondezi.”

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.