Name and Location
Ncondezi coal to power 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 has been granted an extension for meeting certain conditions of the conditional commercial deal it signed with Electricidade de Moçambique (EdM) for its 300 MW power plant.

Following discussions with EdM and progress made on the power project, EdM has formally agreed to extend the deadline for the conditions precedent. The extension has been granted with the longstop date of September 30, and is subject to several conditions.

These include that Ncondezi has to reach a binding agreement with a strategic investor acceptable to EdM, and to be the key responsible party for the development, construction and operation of the power project.

Ncondezi also has to obtain bankable environmental planning and management, and operations and maintenance agreements for the power plant, mine and common infrastructure, while establishing an agreed timetable between EdM, the strategic investor and Ncondezi to finalise the key commercial agreements. These agreements comprise namely the power purchase, power concession and the coal supply agreements.

The agreed commercial deal includes the range for the starting electricity tariff that EdM will pay, which will be subject to adjustments during the 25-year operational life of the project.

The starting tariff range is based on several assumptions, including indexation; financing, coal, operator and maintenance costs; and the technical parameters and capital costs contained in the binding power plant engineering, procurement and construction bids.

Based on a target project capital structure of 70% debt and 30% equity, Ncondezi believes that the conditional commercial deal supports the economics of the Ncondezi power plant and provides a regionally competitive dollar-based project equity and international rate of return.

In March, Ncondezi also received approval from the Ministry for Coordination of Environmental Action for its environmental- and social-impact assessment (ESIA) on the 92 km transmission line that will connect the project to the Mozambique national grid. ESIA approvals had been received for the mine and the power plant.

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.