Ncondezi is focused on the phased development of its large scale, long life, integrated thermal coal mine and 1800MW power plant project which it believes offers the most achievable and financeable route to production
The first phase of development is a 300MW integrated mine and power plant project (“300MW Project”) that will use existing transmission capacity to meet local demand in the North of Mozambique. This scenario maximises Ncondezi’s control of project delivery in a reasonable timeframe and is not reliant on the development of third party infrastructure projects.
The 300MW Project has unique advantage over other potential power projects in the region as it is solely dedicated to meeting Mozambican demand, it is scalable in 300MW units ultimately to 1800MW, it is close to existing transmission infrastructure with available capacity and, perhaps most importantly, it is not dependent on the development of rail and port infrastructure projects.
The Company plans to develop the 300MW Project in partnership with a power plant developer and operator and a Strategic Partner Search is underway. Ncondezi expects the power project to be financed through a typical Independent Power Plant (“IPP”) financing structure involving debt finance.
Aligned to Government Strategy
The 300MW Project is closely aligned to the Mozambican Government’s stated objective of accelerating the electrification of the country and increasing access to electricity as the country is only 20% electrified. Mozambique currently has the largest percentage demand growth in southern Africa, forecast to grow by 2000MW over the next 10 years. Over recent years the southern Africa power sector has benefited from increasing de-regulation and an upward trend in electricity tariffs, which have increased by up to 50% in the region as a whole and by 10.3% in Mozambique over the past two years, driven by a growing shortfall in generating capacity and continually increasing high demand.
Development of Export Product
Production of an export thermal coal product and associated capital expenditure will be initiated only when rail and port infrastructure in Mozambique is sufficiently advanced. This approach has the dual benefit of an expected reduction in the start-up capital outlay for the mine and reduces Ncondezi’s reliance on third party rail and port infrastructure development for project operations to begin.
Since initiating the Mine DFS in Q3 2010, the macro-economic environment has changed considerably with capital constraints for mine development projects and the weakening of seaborne thermal coal prices. The developing coal basin around Tete has not been immune to these changes and the large, capital intensive export rail and port infrastructure projects primarily for coking coal projects are developing more slowly than originally envisaged.