Feature ArticleOur feature articles this week are:Riversdale...

Feature Article

Our feature articles this week are:

Riversdale Mining Limited

Telstra Corporation Limited

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...