Scoping Study Results
SRK completed a scoping study for the Ncondezi Project in April 2010 identifying the potential for an economically viable and technically feasible conventional open-pit mining operation. Optimisation studies have indicated a number of potential pit shells, with the shallow nature of the coal and minimal overburden removal in the South Block being unusual within the larger Tete Province and conducive to open pit mining.
The optimisation study identified two pit shells in the South and West Blocks which provided an indication of the potential for future economic extraction to recover raw coal for washing to an export quality (see image below).
Although the quality of the overall coal zones appears to have a moderate to high ash content from the raw quality data, the scoping study demonstrated that the coal zones can be beneficiated at yields of 26% (by dense medium separation) to produce a 24% ash, 6,000 kcal/kg GAR export thermal coal product.
A combined optimisation schedule of the South and West Blocks was produced by SRK as part of the scoping study with the potential to produce 350 Mt of 24% ash, 6,000 kcal/kg GAR thermal coal product over a 37-year mine life. The Scoping Study mining schedule for the South Block anticipates production of thermal coal product to ramp up from 2.6 Mtpa in year 1 to 6 Mtpa in Year 3 and 10 Mtpa in Year 5 and beyond. The combined optimisation schedule in the scoping study requires material movement at an average stripping ratio of 1.34. The scoping study estimated that capital costs for mine construction are US$376 million, including 10% contingency and 15% implementation charge and would require a 2-year mine construction period.
The study took the point of sale as the port of Beira, which is 600 km from the Ncondezi Project site.
A summary of the average operating costs per tonne of saleable coal, including pre-stripping, 10% contingencies and mine closure costs, is outlined below:
Unit Operating Costs
| Cash Cost (at point of sale) | (USD/t) | 48.68 |
| Cash Cost (at mine gate) | (USD/t) | 31.68 |
| Off-Site Unit Cost | (USD/t) | 17.00 |
Following their review of the results of the scoping study, the Directors believe that there is significant future upside potential for resource expansion, resource upgrade and pit optimisation which would result in increased yields and lower operating costs.
