50% and we only have drilled a section of one lease..don't be...

50% and we only have drilled a section of one lease..don't be short.

Riversdale Mining Limited (RIV) - Speculative Buy



Confirms Mozambique Coking Coal Quality





Brief Update Note

Stock:
Subject (RIV $9.70)

Valuation:
$20.83

Market Cap (Full. Dil.):
$1,800.5m ($1,947.5m)

Issued Capital (Full. Dil.):
185.6m shares (200.77m)

Cash (as at 31 March 2008):
$335.3m

Date:
10 June 2008

Resources Analyst:
Andrew Muir




Details

Testwork Confirms Premium Coking and Thermal Products – Riversdale Mining Limited (“Riversdale”, “Company”) has the quality data for five of the major seams, representing ~80% of the open pit resource, at its Benga Licence in Mozambique. The data confirms that the project will generate a premium quality hard coking coal product, similar to that from the Bowen Basin, as well as thermal products for both domestic and export markets.



Coking Coal As Expected – The results for the coking coal were in line with our expectations, with a yield of 30%, 10.5% ash content, volatiles of 19-25% and low moisture levels. Other key characteristics include:

o high CSN (swell index) of 8.5,

o vitrinite levels of over 80%,

o low coal ranks of 1.2 – 1.6,

o good fluidity levels of 2.1 – 3.1 (log basis),

o strength after reaction (CSR) ~70 for comparable coking coals from the Moatize Basin, and

o a low sulphur level of 0.86%.



Two Thermal Coal Options – The Company is likely to have two thermal coal products at Benga, with an export product and a domestic mine-mouth product for power generation. However, the proportion of the two has yet to be determined and studies are ongoing. Using the domestic thermal as a base case, the yield is 31%. The energy content is 5,500 Kcal/kg on a gross air-dried basis (GAD), with 33% ash, a low moisture content as well as high boiler efficiency and good grind ability. These specifications make it suitable for the proposed mine mouth power station.

The export thermal product will be a relatively high ash (20%) and high energy (6,700 Kcal/kg GAD) product due to its low moisture content and high rank. The Company believes that the export products relatively benign ash chemistry should perform well with low to moderate ash deposition potential.



Planned ROM Production of 20mt per annum – Benga should produce 20Mt of ROM production annually when at full capacity. This should generate 6Mt of coking and 6Mt thermal coal per annum. Note that this production is from open pit only, with no underground production factored in. Stripping ratios are initially 1:1, rising to a maximum of 4:1 during a 25 year mine life. Production is likely to commence in late CY2010/early CY2011, initially producing ~2mt per annum of coking coal, ramping up to the 100% capacity of 6mt per annum by 2014/2015.



Impact

The release of the quality figures has been much awaited by the market. The characteristics were close to our expectations, though we were expecting an indication of the domestic/export thermal ratio. Notably, the quality data highlighted that there were no significant issues with the likely products, and that the coking coal compares well to Bowen Basin coking coals. Testwork is still underway to determine the CSR, however, the Company believes that based on the petrographic evidence as well as ash analysis, the CSR will be comparable to the best Australian coking coals.

Following on from the release of the quality data, we expect a new Benga resource in July/August. This new resource should see an increase in the confidence level, but not size. A larger resource, possibly including drilling on some of the other Mozambique licenses, should be released late CY2008 or early 2009. We also expect that over time more quality data should be released on potential underground seams, though the Company is currently focussing on the open pit potential. We understand that the Company is also progressing discussions pertaining to both the rail and port infrastructure, as well as investigating additional options, including barging the coal. We continue to rate Riversdale Mining Limited as a Speculative Buy.