Mozambique: Coal boosts regional “powerhouse” status

2 June 2008

Maputo, Mozambique, 2 June – Coal mining projects have multiplied over recent months in Mozambique, boosted mainly by international and Indian companies, allowing this electricity exporting nation to boost the country’s status of regional powerhouse.

Abdul Kamara, energy specialist for the African Development Bank, forecast last week that investment in exploration of Mozambique’s extensive coal reserves and related energy projects, would rise to US$30 billion in the next decade.

“Mozambique is expected to become the second biggest coal producer (after South Africa) with the development of the Moatize Project in 2010,” said Kamara, cited by Reuters.

In July 2007 the Mozambican government officially handed over the concession to operate the Moatize coal mine for 25 years to Brazilian company, Vale.

With reserves estimated at 2.5 billion tonnes, the mine should start production in the first quarter of 2011, after investment of US$1,398 million.

Vale aims to extract 11 million metric tonnes a year, with 8.5 million tonnes being coking coal for use in the metals industry and 2.5 million tons of thermal coal for use in power stations.

According to the ADB, coal production in Africa will increase on average by 3 percent per year by 2011, due particularly to an increase in Asian demand.

The price of the raw material has been rising “on the back of” oil prices, showing it to be a cheaper alternative.

“Coal has recently come back into fashion due to three advantages: lower prices per energy unit, higher reserves-to-production ratio, and a different geopolitical distribution of reserves,” said Kamara.

India and China will be responsible for a 73 percent increase in world demand for coal in 2030, to 4.994 billion metric tonnes equivalent to oil, while in 2005 consumption was 2.892 billion metric tonnes, according to the International Energy Agency.

Following the first wave that brought great multinationals of the mining sector to Mozambique, like Vale or Arcellor Mittal, in recent months it is mainly Indian companies securing raw material sources.

The official announcement was made a few months ago, when India’s coal minister, Dasari Narayana Rao said in Parliament that a joint venture made up of state-owned energy mineral resource companies NTPC, Steel Authority of India, NMDC, Rashtriya Ispat Nigam and Coal India would be set up to acquire foreign assets.

This group of companies, that should have capital of close to US$2.3 billion, has visited Mozambique’s mines and spoken to authorities, though up until now without any visible results.

Meanwhile, last week, BEML Midwest – a joint venture between Bharat Earth Movers, Midwest Granite and Sumber Mitra Jaya of Indonesia – acquired its first Mozambican coal mine, for exporting coal to India.

Similarly, Global Steel Holdings, the company that brings together the steel making shareholdings of the Ispat group, bought two blocks for coal exploration, as part of a 4.6 billion rupee investment (about US$116 million).

Located in Tete province – close to the mining areas of ArcelorMittal, Tata Steel and Vale – the blocs cover an area of 30 thousand hectares and have proven reserves of 70 thousand tonnes of coking coal.

The coal will be exported via the port of Beira, around 600km away by a rail link currently under reconstruction, set to be operational within 12 months.

In partnership with the Australian Riversdale Mining, Indian giant Tata Steel is involved in two main coal exploration projects in Mozambique. Benga and Tete, which are due to start in 2010.

The Benga license, in the district of Moatize, is estimated to have reserves of 1255 billion tons of coal, of a quality appropriate for use in steel making and at coal-fired power plants.

The multinational ArcelorMittal, also from the Indian capital, recently acquired a 35 percent stake in the joint venture, Rio Minjova Mining and Exploration Company for US$2.5 million, while partner Black Gold Mining (Moc), transferred its coal concessions – 49,360 hectares, in the area of the Minjova river, in Tete province.

ArcelorMittal also has the option to become a majority shareholder in the joint venture as long as it pays an additional US$2.5 million and there is confirmation that the “proven and probable” reserves are considered satisfactory.

Also in Tete, Central African Mining and Exploration (Camec) recently made an important discovery of coal – up to 868 million tons.

More recently, Japan has also shown interest in gaining a position in the Mozambique carbon sector.

In light of the increase in the price of raw materials, Japanese Nippon Steel recently announced that it intended to be involved with Vale de Rio Doce at the mine in Tete.

“In these extraordinary circumstances of high prices of raw materials, we have great interest in alternative sources. We want to invest if we have opportunities,” said Shoji Muneoka, who took on the chairmanship of the company in April. (macauhub)