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Ncondezi CEO says it's making "strong progress"

Published: 04:07 16 Jul 2012 EDT

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Jeremy Naylor talks to Nigel Walls, Chief Executive of Ncondezi Coal
Ncondezi is an exploration and development company that holds two exploration licences in the Tete Province of Mozambique. Listed on the London Stock Exchange on AIM market, ticker symbol NCCL, the web address is www.ncondezicoal.com


Jeremy Naylor: You’ve just released an update on the Tete asset, and are now targeting phase development of an open pit mining operation. Explain what today’s announcement means for the Ncondezi project. 

Nigel Walls: Yes, I think what today’s announcement was about, we were trying to provide shareholders with a project update for the Ncondezi project, detailing the next phase of development. And I think particularly we’re excited by the progress that has been made so far on the project. Particularly with the announcement today, we’re very excited about the power story that we’re starting to develop and wanted to share that with shareholders. 
I think we have a project that was just talking about looking to export coal to the Asian market, but now we’re really talking about two potential components to the project, component exports in coal to the Asian market, but also trying to focus in on the regional power in the Southern African region where there is a huge shortage, potentially, of power in that region. 
And I think that, from our point of view, adds significant value to the project because we are talking about large tonnages of coal providing power to a region that has a shortage of power as we stand at the moment, and going forward that shortage is likely to increase. 

Jeremy Naylor: Why have you moved away from being just a coal exports solution? 

Nigel Walls: I think partly I’ve already talked about that, but from our point of view, during the feasibility study that we’ve been undertaking, we’ve always been aware of the potential short forum power in the Southern African region. And as the feasibility study progressed this started to confirm what we had always suspected that the short forum power in South Africa and other Southern African countries is fairly acute at the moment; it is forecast to get a lot worse. 
And when you look at a power station providing effectively exported power from Mozambique into that region, the economics become very compelling, it adds significant value to the project at all [0:02:56] because obviously as a coal project we’re looking to sell coal to the power station. The project is on our doorstep, the power station would be a mine mouth power station, so it adds a huge amount of optionality to the coal project. It adds flexibility as well, we’re looking at the two markets. 
And as I say, it’s one of the areas in terms of Mozambique, the Tete coal region, it’s one of the largest untapped coal reserves, resources in the world. So we are talking about a power project that has the potential to provide a lot of power, and we’re talking about a big project here; it’s not something that’s small. It’s going to be a big project with the resources to carry on providing power into that region for the next 20/30/40 years. 
So, as I say, it adds a huge amount to the overall project and the company, and to the bottom line, the existing and hopefully future shareholders. 

Jeremy Naylor: How do you expect to fund the power project?

Nigel Walls: The power project itself, we are in ourselves not actually a... We are a mining company, so we actually have engaged in a strategic partnership which has already started. And what we’re actually looking for is potential companies that would be involved, have been involved, would like to be involved in power stations, but also be involved in the Southern African power story. 
And that is something that we feel that from the interest that we’ve already had, that we’ve had interest incoming already. So there are people that potentially are interested in getting into that Southern African power vacuum, if you like, at the moment. 

Jeremy Naylor: What about the timing for this? 

Nigel Walls: Well, timing is all geared from our point of view as a strategic partner search, as I say. We’ve already started that process, we’re looking at our power station feasibility coming out in quarter three of this year. 
And by the end of the year – we’re fully funded as a company to undertake all of these initiatives through to the middle of next year, so the strategic partner search is geared at the moment to coincide with the feasibility study not on the power station but on the coal mine actually being completed by the end of the year. 
So we’ve got a number of months to actually identify and talk to and allow companies to do their own due diligence and get involved in the project. And that is the point at which we’re looking from that point of view towards the end of the year, and then go from a project point of view into detailed engineering that will take all the various government regulations and permitting through that. 
And that process has already started but, as I say, we’re aiming for the whole thing by the end of this year. 

Jeremy Naylor: So what are the key next steps, then, for the project? What should investors know? 

Nigel Walls: Well, I think from our point of view, obviously we are looking at the delivery of the power station, definitive feasibility study in quarter three of this year, and that is being undertaken by a well known engineering company. 
Following on from that, the actual mine project definitive feasibility study will be coming out shortly after that, end of Q3, beginning of Q4 of this year. 
The strategic partner search, as I say, is already under way. That is, as I’ve already indicated, aligned to meet the timing of both the project and the power station definitive feasibility study. So those are the three main things from that point of view. 
On top of that, as we have progressed and we’ve finished the exploration and we go through the feasibility study, we will look to convert the exploration licence that we have into a mining licence. We have already signed a mining framework agreement, but we’ve got to convert that into an actual mining licence. And we’re going to start the process of that in quarter four of this year and progress with that. I’ve no reason to believe that it’s not going to happen at all. 
And I think from our point of view we’ll carry out ongoing discussions with government agencies and the key players as regards the whole power side of it, because from the government’s point of view, the power station is very much aligned with their strategic thinking. They like the idea because obviously from their point of view we are adding a huge amount of value to the coal, and actually exporting the power. 
So we’ve had very good feedback from the government so far and we’ve got to carry on that message with the government, talking to the government and getting the various licenses and agreements in place. So those are the main things that is going to happen between now and the end of the year. And we will be announcing various things as they actually are signed up and agreed. 

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