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Wednesday, June 22, 2011

Rio may add 25 million tonnes of coal through Riversdale deal

Wednesday, 22 Jun 2011

Rio Tinto Group, the second largest mining company may add 25 million tonnes of Mozambique coal to its annual output after buying Riversdale Mining Ltd.

Mr Steve Mallyon Riversdale Managing Director said “When you add it up, Rio will be potentially producing by 2016-17, 25 million tons of product, both coking and thermal coal. That’s if all goes according to plan.”

He said that Riversdale Benga project due to begin output in November or December will ship about 5 million tons of unprocessed coal and may expand to 20 million tons. The adjacent Zambeze project possibly costing USD 4 billion may produce 42 million tons a year, rising to as much as 90 million tonnes of unprocessed coal making it one of the world’s largest coal mines.

IHS McCloskey data on Bloomberg show that producers such as Vale SA are digging mines in Mozambique and Anglo American Plc is seeking coal projects there as prices for the fuel climb. The cost of steam coal sold through South Africa Richards Bay terminal rose about 30% in the past year to USD 118.83 a ton.

Mr Mallyon said A scoping study, completed on a Richards Bay type coal terminal in Mozambique earlier this month looks pretty good. Richards Bay is Africa largest coal terminal with an annual capacity of 91 million tons.

He said that Rio may review the level of 10% to 12% that Riversdale planned to keep in its proposed USD 1.3 billion Benga power plant. Rio as a bigger company, I think, sees the strategic value of the project. Riversdale has previously had interest in the project from Chinese banks as well as companies in the UK US and South Korea.

Mr Mallyon said Eskom Holdings Ltd the largest provider of electricity in South Africa may buy power from the plant. He said that Riversdale expects this year to complete the sale of its Zululand Anthracite Colliery too small for Rio and a specialized product it doesn’t know well after interest from South Africa, Australia, Canada and the UK. It may produce almost 900,000 tons this year. (sourced from Bloomberg)

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