By Alex MacDonald
LONDON - Mozambique coal explorer Ncondezi Coal Co. Ltd. (NCCL.LN) said Monday that it plans to initially produce 4 million tons of thermal coal a year from its Mozambique project, half for export and half for domestic power generation.
The domestic coal would be used to feed a 1,800 megawatt power station that it's considering building in phases. It plans to complete the definitive feasibility studies for the mine and the power station in the third quarter.
Ncondezi is one of several mining companies that have flocked to Mozambique's northwest Tete province to develop coal mining projects largely for export. Brazilian miner Vale SA (VALE) has already started exporting coal for use in steel making while mining Titan Rio Tinto PLC (RIO) is in the process of completing its own project and Eurasian Natural Resources Corp (ENRC.LN) is also developing one.
The Mozambique government has expressed its preference for projects that add value to commodities rather than projects that just export raw commodities. To that extent, Ncondezi is now designing plans to build a coal-fired power plant that would initially have a power production capacity of 300Mw and use non-exportable coal from the project to generate electricity that could then be exported to South Africa where power shortfalls are still a problem. Mozambique is the largest power exporter to South Africa.
"The power component of the project...will enhance overall project economics by providing revenue from non-export grade products at a minimal additional cost" said Chief Executive Nigel Walls in a statement. He also added that "The long-term fundamentals for the seaborne thermal coal market remain strong as demand growth is driven by the build out of power generation in Asia."
The U.K. listed company expects to start producing thermal coal from its project in the second half of 2015 and said its coal resource base could support an open cast mine that is able to produce more than 10 million tons of the coal used in power generation over a 20 year period. Ncondezi plans to produce up to 5 million tons of export thermal coal and 7 million tons of domestic power plant feedstock from the project.
Meanwhile, Ncondezi plans to start building its first 300MW of power generation capacity from the power project in 2015, with first output due in 2017. It plans to build up to 600MW of power production capacity in the first phase and is studying plans to build a 1,800MW power plant in the future which would consume 7 million tons of coal. The company is currently broadening its search for a strategic partner to take into account the power project.
Ncondezi shares closed Friday at 31.5 pence and are down 40% since the beginning of the year.
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