RIV 0.00% $16.20 riversdale mining limited

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

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    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
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Currently unlisted public company.

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