Aquila divests Mozambique coal assets for $60m

Como-based Aquila Resources Ltd will sell its Mozambique coal exploration tenements to Sydney-based Riversdale Mining Ltd in a cash and scrip deal worth around $60 million.

Riversdale will pay $26 million to Aquila, as well as giving it 10 million fullly paid shares in the deal.

Aquila said in an announcement the decision came as a result of a reprioritisation of its Southern African iron ore exploration and development activities.

Riversdale said the new tenements complemented its existing holdings in the Tete area.

The full text of an Aquila announcement is pasted below

Following a strategic review of its Southern African exploration projects, Aquila Resources Limited ("Aquila" or the "Company") has concluded an agreement to sell all of its Moçambique coal exploration tenements to Riversdale Mining Limited ("Riversdale").

Consideration paid today by Riversdale for the acquisition is comprised of A$26.0 million in cash and 10 million Riversdale fully paid ordinary shares, which based on yesterday's closing price values the transaction at A$59.2 million.

The decision to divest the Moçambique interests was made by Aquila as a result of reprioritising its Southern African activities on the exploration and development of its highly prospective iron ore tenements recently granted to it in the Northern Cape and Limpopo regions of South Africa.

As a result of the completion of this transaction and following the exercise by CVRD of its purchase option to acquire 51% of the Belvedere Coal Underground Project, Aquila will have cash reserves and liquid investments of approximately A$170 million.

As a consequence, the Company is in a strong financial position to advance the development of its coal and iron ore interests in Australia and Southern Africa, in addition to retaining the financial capacity to fund acquisition and expansion opportunities as they arise.

"Aquila sees this as an attractive transaction, which not only enables us to focus on our advanced coal and iron ore projects in Africa and Australia, but also to crystallise shareholder value created from the Moatize tenements. Furthermore, the combination of Aquila's Moatize tenements with those of Riversdale gives Aquila an attractive investment position in one of the leading explorers in the Moatize Basin, as is evidenced by the announcement of the Tata Steel transaction earlier this week" Aquila's Executive Chairman, Tony Poli said.

RBC Capital Markets acted as financial advisor to Aquila in relation to the transaction.

The full text of a Riversdale announcement is pasted below

Riversdale Mining Limited (ASX: RIV and "Riversdale") is set to become a leading coal mining enterprise in a major emerging coal region following an agreement to acquire additional exploration tenements in Mozambique.

The extensive portfolio of tenements has been purchased from Aquila Resources Limited (ASX: AQA and "Aquila") and is located in the Tete province, contiguous with tenements already held in Mozambique by Riversdale, and those held by one of the world's largest mining groups, Companhia Vale do Rio Doce ("CVRD").

The acquisition positions Riversdale as the largest tenement holder in Tete-Moatize, with an extensive area capable of supporting long life operations in this emerging and highly prospective region.

The combined tenement size now held by Riversdale is in excess of 290,000 hectares.

Consideration for the acquisition which was completed today is comprised of 10 million shares in Riversdale and A$26.0 million in cash.

The new tenements complement Riversdale's existing holdings in the Tete area, and their proximity will facilitate effective infrastructure development as the project advances to development status.

Chairman and CEO Mr Michael O'Keeffe said: "This acquisition further strengthens our strategic foothold in an emerging coal region of increasing global significance. In Mozambique Riversdale now has a significant tenement position with exploration potential in a highly prospective area that we believe is set to become the "next Bowen Basin".

"In Mozambique, we have neighbours the calibre of CVRD and a government that has shown itself to be very supportive of foreign investment and new development. This is a great opportunity for our company to invest in the region before it becomes a major thermal coal resource for southern Africa, and coking coal supplier to India and other global export markets," Mr O'Keeffe said.

The acquired tenements comprise seven licences and cover an area of 86,620 hectares. Six of the tenements are granted Prospecting Licences and the seventh is in the process of conversion from a Reconnaissance Licence to a Prospecting Licence.

Exploration has been undertaken by Aquila on these tenements in 2005 and 2006, and over 5,000 metres of drilling has been completed. One hole intersected the Chipanga seam and was 30.2 metres thick from a depth of 29.6 metres. The coal quality, particularly in the lower 13.1 metres portion of the seam, is comparable to the coal expected to be mined from the tenements held by Riversdale in the Tete area.

In addition to ramping-up its current exploration program in Mozambique, over coming months Riversdale will assess the prospectivity of the new tenements and develop drilling programs that will provide information for the company's feasibility studies. Riversdale is currently drilling in excess of 5,000 metres a month on its existing tenements, and this will now extend the potential scale of the project over a much wider area.

Mr O'Keeffe said: "Riversdale has an excellent relationship with the Mozambique government which is fully supportive of the company's endeavours in the country with this additional investment.