News Room - Steel Industry

Posted on 24 Jun 2010

Riversdale, Wuhan Iron Agree on $800 Million Coal Project in Mozambique

Riversdale Mining Ltd., an Australian developer of coal projects in Africa, signed an initial $800 million agreement with Wuhan Iron and Steel Corp. to build a coking coal mine in Mozambique’s Tete province.

 

Wuhan will buy a 40 percent stake in the Zambeze project and 8 percent of Riversdale, the Sydney-based company said today in a statement. The deal values the project at $2 billion.

 

The Chinese steelmaker will have the right to buy at least 40 percent of the coking coal from Zambeze, Riversdale said. The Australian company also signed a logistics partnership accord with China Communications Construction Co.

 

“Through our Chinese venture partners, we gain funding to develop the mine and a buyer for part of Zambeze’s offtake,” Riversdale Executive Chairman Michael O’Keeffe said. “We also gain access to world class mine to ship logistics and infrastructure expertise to facilitate the export of the mine’s coal products.”

 

Riversdale shares rose as much as 6 percent to A$11.17 in Sydney, the most since March 1, and traded at A$10.98 as of 12:42 p.m. in Sydney. Wuhan Steel’s listed unit Wuhan Iron & Steel Co. fell 1.1 percent to 4.57 yuan in Shanghai.

 

The non-binding agreement “needs regulatory approvals as well as other necessary steps to be completed,” Wuhan Steel spokesman Bai Fang said today by phone from Wuhan city, without elaborating.

 

Global supplies of coking coal will be crimped this year as Chinese imports near the 2009 record of 34.4 million tons, and demand from other nations picks up with the economic recovery, Teck Resources Ltd. said in March. Prices may reach $300 a ton in the second half, Citigroup said April 12.

 

Iron ore and coking coal are the two key ingredients in steel. Coking coal is turned into coke and used in blast furnaces.