25 May 2012

Rail deal cheers Ncondezi Coal

18/01/2012 Robert Tyerman

An agreement with mining giant Rio Tinto entitles Ncondezi Coal (NCCL) to export 10 million tonnes from Mozambique for no capital contribution.

The British Virgin Islands-based company, which hopes to be exporting a planned 10 million tonnes a year from its Ncondezi project in the southern African country's Tete Province from 2015, has signed the infrastructure agreement with Rio and another local coal developer Minas de Revuboe (where Nippon Steel has 33 per cent) to study the options for greenfield rail and port development.

AIM-quoted Ncondezi, steered by the redoubtable Graham Mascall, is entitled to an export allocation on what is called the 'integrated transport development project', but will not be required to contribute capital to the project's feasibility study or to its development costs, even if it will have to pay a tariff to use the facilities. Since fears about infrastructure challenges have contributed to Ncondezi's hitherto persistent stockmarket weakness, it is not surprising Mascall hails this agreement as 'a tremendous step forward'.

There remain the challenges of producing enough high quality coal and securing advantageous offtake deals. But the market has reacted by sending the shares, which had fallen from 230.5p to 46.5p over the past year, up 10p to 59p, valuing the company at £71.5 million.

They could be worth a speculative recovery punt, despite the obvious risks.

Tags: AIM market, Coal, Graham Mascall, Mozambique, Rio Tinto

Sector: Mining

Companies: Ncondezi Coal Company

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