The comments in the article below are an abbreviated restatement of our analysts? reports.
A glossary of frequently used investment terms can be found at the end of this report
Feature Article
Riversdale Mining Limited
Last traded: $13.10
Buy
Summary of previous report dated 23 November 2010
Infrastructure timing is the key
We initiate coverage of RIV with a Buy recommendation and $15.00 price target. RIV is an African focused coal company that operates the ZAC (74%) mine in South Africa and is developing two large projects in neighbouring Mozambique namely Benga (65%) and Zambeze (diluting to 60%). RIV has an impressive 13 billion tonnes in coal resources in Mozambique containing significant quantities of export quality hard coking coal. We are attracted to RIV?s large resource base, prospective tenement holding and leverage to hard coking coal prices. In our opinion, RIV is an attractive long term investment despite some short to medium term infrastructure hurdles in Mozambique. Key catalysts for the stock are: 1) completion of the USD800m agreement with Chinese steel maker WISCO for a 40% stake in the Zambeze project; 2) first production from Benga; and 3) infrastructure development. The key risk for the three stage Benga project is timing of rail and port infrastructure for stages 2&3 which is not unusual for large infrastructure projects in Africa and incorporated into our base case. The main drivers of valuation uncertainty for RIV are coal prices and exchange rates.
Attractive coking coal exposure Benga is a large scale project and will be a major determinant of share price performance in the medium term. RIV also has a non-binding MoU with Chinese steel maker WISCO for the development of the 9 billion tonne Zambeze coal resource, more than two times the size of Benga. These projects represent the most significant contribution to our valuation and have the potential to make RIV a significant player in the coal industry.
Sector: Energy
Market cap: $3,099m
Price target: $15.00 Loading...
RIV Price at posting:
$13.45 Sentiment: Buy Disclosure: Held
