A large, promising coal project for a standout, ideal company

Sitting in Mozambique’s Tete Province, the Ncondezi Coal Project is the jewel in Ncondezi Coal Company Limited’s portfolio (AIM: NCCL) and it is not difficult to see why. There is already 1.8 billion tonnes in confirmed coal reserves, making this a highly significant project today and a fantastic thermal coal opportunity with great potential for coking coal to boot. Mozambique is a very attractive host country for anyone looking to work and/or invest in such a project and with global demand for product running strongly it is an enviable location for future exportation to the Indian and Chinese markets. TABJ met with Graham Edward Mascall, Ncondezi’s CEO, to gain insight as to how the company plans to further the resource, work towards completing its Definitive Feasibility Study (DFS) and look at a few of the key attractions offered by this asset today.

Approaching Ncondezi

Mascall says that the Ncondezi coal licenses in Mozambique were originally acquired by a venture capital fund called Strata Limited back in 2007. Strata spent between $3 to $4 million dollars on two phases of further exploration which completed late in 2009, providing the basis for the Ncondezi Company to get its weighty JORC resource statement in place today.

“In the middle of last year, Strata who are a small team using consultants to do the work and carry out the drilling on the project at the time, recognised that they had a significant coal resource and asked me to go and have a look and give a recommendation,” Mascall recalls.
“I said ‘you’ve got a tiger by the tail’—a large coal resource in the right location [near] Vale’s Moatize and Riversdale’s Benga, you need to get some additional management on board.”

Strata then asked Mascall to become CEO and put a team together to move the project on, and the rest is history. On June 10, the company joined the London Stock Exchange’s AIM list. Mascall says that considering the project and management team location, this looked to be the most logical market for Ncondezi.
“In choosing Liberum Capital and Renaissance Capital to help us with our IPO, despite it being fairly volatile in the marketplace in early June, we were able to raise $52 million,” he says.

“That gives us all of the funding we need to get to our feasibility target in the middle of 2012. The AIM market is well served in terms of brokers and analysts that cover the sector that know about coal and cover Africa including Mozambique.”

Ncondezi currently has four licenses within the project, with additional plans to explore other areas in the future, but there are two in particular that continue to cause real excitement.

Ncondezi’s strong suit

Mascall says that the major emphasis for work at the Ncondezi project today is the 804L and 805L licenses. On September 1, the Definitive Feasibility Study work programme began on these licenses and will be carried out over the next 18 months, leading up to completion slated for mid-2012.

“The other two licenses are to the west and much more remote, but we do plan to put some scout holes down to test for occurrence of coal as they’re both underlined by Karoo outcrops —the pathfinder for potential coal,” Mascall says.

“We [already] have a very large JORC resource—1.8 billion tonnes of coal in the area that we’ve drilled—and half of the major licenses, 804/805 have not yet been drilled.”

Part of the current drilling programme will involve assessing additional resources at these areas where drilling has already taken place. The company also plans to test more unknown areas to confirm the existence of coal and identify whether the resource is even bigger than it is presently defined to be.

“[It is] also to get better coal data on the thermal coal, which we know we have, and to potentially confirm the coking coal which we are optimistic [about] based on some limited core-holes we sampled late last year, but for which we need to get more detailed and comprehensive data to confirm what we expect to be there,” Mascall says.

“We’re on about our 20th new percussion hole and this is the first phase with a programme of about 55 holes within a total expected new drill programme that will probably mean we’ll drill around 300-350 holes for purposes of our DFS over the next 18 months.”

Ncondezi has already seen some interesting coal intersections and Mascall says that the company is about to site a core diamond drill to start in the 805L license to provide samples for further thermal and coking coal properties. The results achieved and work underway strongly indicates an exciting time over the next 18 months for Ncondezi.

The news has just begun

Mascall says that news-flow today is really only just getting started for Ncondezi, after all, the next phase of drilling has only just kicked off.

“The next news announcement may be towards the end of the year in terms of results from that initial phase. We’re also at the stage of looking at moving forward on an initiative on the infrastructure side,” he explains.

“We will also be considering whether to look at an onsite power plant for our coal product, and we’re keeping our eyes and ears open in terms of potential M&A opportunities there or that may occur in the near-term.”

Of course, the real big news will emerge in early 2011 once the tests on metallurgical coal sampling are announced and confirmation on further thermal coal potential and/or existence is revealed, but the time to start paying attention to Ncondezi is now. This is a huge, highly promising, well-managed, financed and positioned project. The thermal coal opportunity here is clear as are indications of potential coking coal. Today the name ‘Ncondezi’ stands for a great historical project with bags of potential and the ideal company to make it happen.

www.ncondezicoal.com

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