The open cut mine, which is 65% owned by Riversdale and 35% by Tata Steel, has secured key supply and labour agreements, including the coal handling and preparation plant supply contract, a resettlement action plan and the project labour agreement, which was signed with the Mozambican National Construction and Mineworkers Union.

Riversdale Mining executive chairman Michael O’Keeffe said the ceremony marked the beginning of a program of works and investment that would eventually see more than $US1 billion expended on developing a major coal mine at Benga.

“This will also be one of the most significant foreign direct investment projects in Mozambique,” O’Keeffe said.

Riversdale Mining holds a dominant landholding position in the emerging coal regions of Mozambique, with 21 exploration licences covering more than 250,000 hectares adjacent to infrastructure, including the city of Tete, power, water, sealed roads, rail, an international airport and direct access to the Zambezi River.

Around 15% of the project’s capital expenditure will be spent in the local market, creating opportunities for the local small businesses and industry in the Moatize region. This will cover the supply of construction materials, furniture, office equipment and vehicles as well as the provision of such services as catering, vehicle and plant hire, cleaning, electricity and plumbing, transport, building, hospitality and banking.

O’Keeffe said Riversdale employed more than 150 people at Benga, representing over 90% of the company’s total employees in Mozambique, and that the mine would create jobs directly and indirectly for up to 4500 people around Tete over the next five years.

Riversdale is building a multi-billion tonne coal inventory on a small fraction of its tenements. Its first project – on the Benga licence – represents less than 8% of the company’s total holdings.

The company believes the scale of the resources at Benga allows for cost-effective open cut mining, with the potential to produce 20 million run-of-mine tonnes of coal per annum for a period of more than 25 years.

In April 2009, the government of Mozambique gave the Benga coal project the green light by approving the mining contract lodged by Riversdale Mining. In October, Riversdale and JV partner Tata Steel announced the approval of Stage 1 of the project, following the review of the feasibility study.

The project approval involved the commitment of $270 million (excluding working capital) to undertake the Stage 1 development, which entails initial output of 5.3Mtpa ROM to produce about 1.7Mtpa of high-quality hard coking coal and 300,000tpa of export thermal coal.

Riversdale shares are up 1.8% to $9.80 this morning.