Riversdale Mining

Riversdale Mining was an Australian coal mining company with major coal interests in South Africa and Mozambique. Following a reorganisation of the company in 2005, the company bought into the Zululand Anthracite Colliery in northern Kwa-Zulu Natal, South Africa and then undeveloped licence areas in Mozambique. The company proceeded to begin the development of the Benga coal mine and was investigating its options with the adjoining Zambeze Project in Mozambique. In June 2011 the global mining company, Rio Tinto, took the company over.

Corporate background
The company, which was first listed on the Australian Stock Exchange in 1986, was originally an online publishing company. Subsequently the company went into voluntary administration until July 2003 after which it was recapitalised and restructured. In 2004 the company changed its name from Waivcom Worldwide Limited and Wave Capital Limited to Riversdale Mining. In May 2004 entered into an agreement to buy a 74% interest in Riversdale Anthracite Colliery (Proprietary) Ltd (RAC), A South African company which held rights to "an anthracite project". While still considering the development of the project into an operating mine the company decided in February 2005 to buy Zululand Anthracite Colliery (ZAC), which was an operating mine. The following year the company bought its interests in Mozambique.

Coal projects
In its 2006 annual report the company stated that in July 2006 the company purchased four separate tenements in the Lower Zambezi Coal Basin of Mozambique. "The tenements cover an area of approximately 203,000 hectares and represent a significant strategic holding in the Moatize Coal Province. This province is considered to be one of the largest known undeveloped coking and thermal coal regions in the world. Riversdale anticipates completing acquisition of the licences in Mozambique during September 2006. Riversdale will undertake an intensive exploration program on targeted tenements in Mozambique with a view to fast-tracking development of sustainable long-term mining operations, with an initial focus on metallurgical coal resources," the company reported.

The company's primary focus was on the Benga licence area in the Moatize area which was adjoined by licences held by the Brazilian company, Companhia Vale do Rio Doce (CVRD). Riversdale reported that "a major feasibility study is being undertaken by CVRD to establish a major coal mine with associated rail and port facilities on its concessions containing 2.4 billion tonnes of coking and steaming coal. Based on geological evidence, the coal bearing series being mined at a nearby coal mine and intersected by CVRD on their licences extends across the Benga Licence. Coal outcrops on the Benga Licences, and data from drilling on each side of the Benga Licence, creates a strong likelihood of hard coking coal resources across these licences."

The company stated that its initial intention was to develop plans for a 2 million tonne per annum export project. It also stated that "it is envisaged that further exploration will help identify thermal coal resources with a view to establishing the viability of local power stations."

As of June 2010 Riversdale held the following coal exploration and mining licences:
 * 946L - the Zambeze project; In June 2010 Riversdale announced that it had entered into a non-binding agreement for Wuhan Iron and Steel Corporation WISCO to buy a 40% stake in this project for $800 million subject to certain conditions.
 * 881L - the Benga project; Tata Steel hold a 35% stake in this project;
 * 1319L - an area surrounding the city of Tete to the west and south; Tata Steel hold a 35% stake in this licence;
 * 945L - to the south and south east of the Benga licence area; 100% Riversdale ownership;
 * 948L - adjoining and to the east of the 945L licence area; 100% Riversdale ownership;
 * 935L - adjoining and to the east of the 948L licence area; 100% Riversdale ownership;
 * 937L - a small block to the north of 948L; 100% Riversdale ownership;
 * 1242L - a small block to the north-east of the Benga licence; 100% Riversdale ownership.

In early January 2012, Alaska state officials announced that Riversdale Alaska LLC -- a subsidiary of Riversdale Mining -- submitted the winning $3 million dollar bid for an almost 10,000-acre tract of land in southern Alaska for coal mining, in the Mat-Su Valley near Chickaloon. Riversdale outbid several companies, including Usibelli Coal Mine Inc.

Infrastructure challenges
The development of the coal deposits around Moatize and Tete of Riversdale and Vale have been contingent on a substantial upgrading of export infrastructure. Riversdale's stage 1 Benga project plans on exporting coal via the reopening of the Sena railway line from Moatize to the port of Beira and an upgrading of the port facilities. The railway line, which was severed in 1983 during civil war in the country, was reopened in June 2010. However, the reopened line has a capacity of only five million tonnes of coal.

The redevelopment of the 665 kilometre long Sena railway line was part-funded by a World Bank loan of $104.5 million, "with another $45 million under consideration" according to a 2009 report. A transport adviser to the World Bank, Jose Chembeze, told Reuters that the Biera port could handle approximately 12 to 15 million tonnes of coal per annum per annum. Chembeze stated that a further upgrade of the railway to allow it to handle 12 million tonnes of coal a year were under consideration and that this would cost an additional $250-280 million.

In an investor presentation Riversdale stated that the "Mozambique Government is planning for a new Beira coal terminal with 18 -24mtpa of new capacity to be constructed (additional to refurbished capacity)". The company states that the expansion of Benga would be timed to co-incide with this. Further expansion of coal exports from the Moatize area, the company flags, could require "double tracking, passing loops, signalling & bridge upgrade" on the Sena railway line.

An earlier report cited Mozambique’s Transport Minister Paulo Zucula stating that the government had secured $500m from the Dutch government and the European Union to to build a new railway line from Moatize to the deep-water port of Nacala by 2015.

Riversdale is also undertaking studies into the option of dispatching coal from its projects via barge down the Zambezi River.

In March 2011, Australia's Riversdale Mining said it will invest $46 million in locomotives to carry coal from its Benga coal mine in Mozambique to Beira port. Riversdale will buy 11 locomotives and 200 railcars for the rail line. According to Bloomberg, the locomotives and railcars will probably be delivered in April 2011 before the mines starts exporting coal in September 2011. The Benga mine is expected to produce 5.3 million metric tons (mt) of metallurgic coal a year by the second half of 2011, some of it for the proposed Benga Power Plant. Output may rise to 20 million mt of met coal a year by 2013, of which 10 million mt will be exported. The project, jointly owned by Tata Power's Tata Steel, has an estimated coal reserve of 502 million mt.

Rio Tinto Takeover Bid
In December 2010 Rio Tinto announced that they had offered $16 cash for each share in Riversdale Mining. In a media release the company stated that "acquisition provides Rio Tinto with a substantial tier one coking coal development pipeline in the emerging Moatize Basin in Mozambique, in line with Rio Tinto's strategy of developing large, long-life, low operating cost assets to grow shareholder value." The company stated that the offer would be sent to shareholders in January 2011. It stated that "the Offer is subject to a number of conditions including Rio Tinto acquiring a relevant interest in excess of 50 per cent in Riversdale, Foreign Investment Review Board approval as well as no material adverse change occurring and Riversdale conducting its business within certain specified parameters."

Riverdale recommended that shareholders accept the offer. The Board nominee of Tata Steel abstained from voting on the proposal. In the announcement, Riversdale stated that "the Benga coal project is expected to commence production of coal in September 2011 and is expected to reach full capacity in 2013, while production from the Zambeze coal project will not commence before 2014. The development of both projects will require a substantial commitment of time, resources and capital including for the development of the rail, port and barging infrastructure which is needed to take the coal to market. The Recommending Directors consider a fixed cash amount of A$16.00 now to be an attractive alternative for Riversdale shareholders. Rio Tinto is a world class mining house with a very strong track record in development and production and has access to the funding and the project management skills and expertise which are required for projects of the size and calibre of Benga and Zambeze. Rio Tinto is well placed to support Riversdale through to the development stage of these exciting projects."

Riversdale is developing the Benga coal mine and the adjoining Zambeze Project in Mozambique. The absence of any mention by Rio Tinto of Riverdale's Zululand Anthracite Colliery in northern Kwa-Zulu Natal, South Africa, suggests that it is likely to be sold off is the takeover is completed.

Rio Tinto completed the takeover of the company in June 2010.

Contact details
Level 1, 50 Margaret Street Sydney NSW 2000

PO Box 5371, Sydney NSW 2001 Telephone: +61 2 8299 7900 Facsimile: +61 2 8299 7999

140/142 Western Service Rd Woodmead Business Park Cypress Place North Woodmead, South Africa, 2191

Postnet Suite 538 Private Bag x29 Gallo Manor 2052

Telephone: +27 11 802 1677 Facsimile: +27 11 802 6855 Website: http://www.riversdalemining.com/

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