Wuhan Iron and Steel has signed an initial non-binding agreement for US$800m with Australian miner Riversdale Mining to develop a coking coal project in the southeast African country of Mozambique.

Under the deal, Wisco will acquire a 40 per cent stake in the Zambeze Coal project valued at around US$2bn. China’s third-largest steelmaker will also purchase an 8 per cent stake in Riversdale for A$10 per share.

Under the initial agreement, Wisco will have the right to purchase at least 40 per cent of the coking coal produced from Zambeze, and at least 10 per cent of the coal mined from the nearby Benga project.

“The project has the potential to become an important source of coking coal for China," said Kuang Zhongxiang, general manager of WISCO International Resources Development and Investment.
However, the agreement still requires regulatory approvals in order to go ahead.

China is the world’s largest consumers of coking coal, an important raw material in steelmaking. It imported 34.4m tons of coking coal last year.