read this article lads...

it explains why the stock started to really perform..?


Mozambique player faces peril of success

* PROFILE: RIVERSDALE
Robin Bromby
* April 28, 2007

THE world is screaming for more coal and announcing an initial resource estimate from a new project should be unalloyed good news for a junior mining company.
But Michael O'Keeffe, chief executive of Riversdale Mining, knows the downside of his company reporting this month that it had had at least 62 million tonnes of coal in Mozambique. Coal close to markets in India, South Africa and Europe means that Riversdale could come into the sights of a predator at any time. With an open register and institutional shareholders that might jump at the chance of pocketing a nice profit on their investment, Riversdale is vulnerable.

"Everyday we drill a hole we become more attractive," O'Keeffe says. It is the Mozambique exposure that has made this Sydney-based company suddenly attractive. Its share price peaked in late 2006 when a wire service reported that Tata was looking to secure coal supplies from Mozambique and then speculated that the $300 million Australian company was well within the Indian conglomerate's buying power.

The came to nothing, but India is certainly looking to this former Portuguese colony to supply some of its future energy needs.

O'Keeffe started Riversdale in 2004 after he leaving a decade-long service at the helm of Glencore's Australian operations. He had trained as a metallurgist and initially worked for the old MIM. He wanted, on leaving Glencore, to get into the coal business but Australia did not appeal. Too many juniors competing for mining projects of all sorts, too few projects at too high a price.

South Africa took his fancy and it was just the place for an aggressive junior. It is a country dominated by big resources companies; South Africa's stock market has never had a culture of encouraging junior companies. O'Keeffe was comfortable with the requirements of black empowerment rules in that country where the local communities end up owning 26 per cent of mining and oil projects. He took over the listed shell of Wave Capital along with its $1.4 million in the bank, and paid $800,000 for the Riversdale anthracite project. Anthracite coal is an important part of processing mineral sands and ferrochrome, its properties acting as a reductant of the main feedstock.

While that project is still in development, Riversdale became a producer after it was offered the Zululand anthracity colliery. That operation was too small for its then operator, BHP Billiton (having been owned by Billiton before the merger with "the big Australian").

There was a year without cash flow from Zululand while the two companies thrashed through massive piles of documents. Eventually it was all sorted, BHP paid over the revenue earned while the negotiations had dragged on and Riversdale handed over a cheque for the mine.

By 2006, after all this, Riversdale was starting to run out of cash so a capital raising was organised. By this time there was considerable interest in the company coming out of Britain and the chequebooks were out. Riversdale banked $37 million, about double its initial target, and also welcomed on board several institutional shareholders including Merrill Lynch.(JP Morgan and UBS are other big names among the top 20 shareholders.)

As of December 31, Riversdale was looking in good financial shape with $50.7 million in the bank, just $6.7 million in debt -- and Mozambique. The country had been a coal producer under the Portuguese, but the industry had fallen apart along most of the rest of the economy during the first decade of independence. The present government has been welcoming to foreign investors. Riversdale is operating in the Moatize Basin in the northern part of the country -- as is Brazilian mining giant CVRD which spent $US124 million to acquire its land position and has spent another $US150 million on its coal feasibility study. That sounds a lot, but CVRD is sitting on some 2.4 billion tonnes of coking coal and seams up to 32m in thickness.

An Indian group heads a consortium upgrading the railway line to the port at Beira, 600km away. That port itself is being dredged to allow panamax vessels to use it.

By contrast with CVRD's big ticket purchase, Riversdale paid $3 million, sight unseen, for its land position. It now has four drilling rigs in action. The initial 62.7 million tonne resource represents exploration in only part of Riversdale's Benga licence area -- and Benga constitutes only 4560ha of the company's total holding in Mozambique of 203,406ha. The Moatize region has been dubbed the new Bowen Basin in terms of its coking coal resource. But Riversdale's ground also contains thermal coal -- with an obvious market in South Africa's over-stretched power generating sector.

There are two major challenges facing O'Keeffe -- one, being able to develop such a large project without having to bring in a bigger company as senior partner and have its equity in Moatize diluted; two, to avoid being picked off for a relative song before the project can deliver its true value into Riversdale's net worth. In the meantime, though, O'Keeffe is clearly excited about the future. "Mozambique is a great place to be," he says.

i own stock. dyor.