28 September 2012 – The results of a definitive feasibility study completed by Parsons Brinckerhoff and independently reviewed by STEAGconfirms economic and technical feasibility of an 1,800MW mine mouth power plant at the Ncondezi project in the Tete Province of Mozambique. This power plant is expected to be competitive with other potential Mozambican and southern African powersuppliers.

The first phase will see a 300MW to 600MW plant established to meet existing transmission capacity and targeting current power demandin northern Mozambique. Mozambican energy consumption is forecast to increase by 1,200MW between 2012 and 2020, while the first commissioning of the project is targeted for 2017, two years after the Ncondezi mine project is expected to startproduction. However, there is technical impediment to bringing first commissioning forward.

The phased development of the power plant in 300MW modules is intended to coincide with development of Mozambicanpower demand as well as the STE Transmission Project and related SAPP access. The target is expansion of the power station to 1,800MW by 2023

The power station is expected to consume 1.2 million tonnes per annum (mtpa) of coal for every 300MW unit, thus requiring up to 7.2 mtpa of domesticgrade coal from Ncondezi mine for the 1,800 MW power station. The initial 300MW power plant capital expenditure is estimated at US$504 million with additional transmissioncapital expenditure of US$50 million.

The project has an attractive standalone NPV of US$1.3 billion and 20% IRR for a 1,800MW power plant, based on conservative power tariff, capital expenditure and load factor assumptions, which importantly does not include theincremental value to mine of selling domestic grade coal. There is strong Mozambican government support for the project and the first Ministry of Energy approvals have been granted. The mine definitive feasibility study remains on track for release in the fourth quarter of 2012.

The proposed site for the power plant is approximately 5.0 km to 7.0 km from the planned coal processingfacilities at the proposed Ncondezi mine and approximately 95km from existing power transmissioninfrastructure. The location will reduce the costs of coal transportation and is at a safe distance from themining areas to minimise any impact of mine blasting operations.

Circulating Fluidised Bed (CFB) technology has been selected as the feasibility study has indicated that it isbetter suited to the quality and composition of the domestic grade coal (compared to pulverised fuel technology), it has proven unit capacity, there are a number of units successfully operating worldwide, and ithas low NOx and SOx emissions. The low emissions will ensure compliance with the government ofMozambique’s requirements for air quality, as well as meet the World Bank and IFC’s standards foremissions from coal fired power plants.

The size of each generating unit has been selected as 300MW as it offers the best efficiency capability ofCFB technology, the best capital expenditure per kilowatt option and the ability of the existing powergrid to absorb and evacuate power.Each 300MW power block will comprise a steam generator, using CFB technology, a steam turbine andgenerator, a wet type of cooling condenser system and electrostatic precipitators. The cooling system isproposed to include wet mechanical draft cooling towers, which will enable the units to operate at higherthermal efficiency. There appears to be sufficient cooling water available and a separate hydrological study,due for completion by the end of September 2012, will confirm this.

The plant is expected to operate at an 82% load factor. Of the first 300MW, 230MWis expected to be supplied to national power utility EdM via the construction of a new 400kV transmission line, at a cost of US$50million. The remaining 70MW will be consumed by the power plant (30MW) and 40MW will be supplied to themine down a 220kV transmission line.

Ncondezi’s power plant project is closely aligned with the Mozambique government’s strategies of in-countrybeneficiation of its natural resources and electrification of the country. The government is committed toguiding the country down a path of sustainable development and maintaining its 7% GDP growth rate. Thisstrategy is founded in further electrification of the country and the development of a regional electricitygeneration and transmission infrastructure. The country has already secured the backing of the World Bankand European Investment Bank to develop local power projects.

Mozambique is also the largest exporter of power to South Africa and has the opportunity to capitalise on thisposition to become an important regional energy player. It is envisaged that, at full capacity of 1,800MW, theNcondezi power plant can contribute to this ambition.