Rio Tinto sells main mining assets in Mozambique for US$50 million

31 July 2014

Anglo-Australian mining company Rio Tinto will sell its main coal mining projects in Mozambique for US$50 million to a consortium of Indian state companies International Coal Ventures Private Limited (ICVL), after paying around US$3.5 billion for the projects.

The group of concessions that will be handed over to ICVL includes the Benga mine, in which Rio Tinto has a majority stake of 65 percent and is the group’s main asset in Mozambique, as well as other concession in Tete province, the mining company said in a statement on its website.

If the sale is approved by the Mozambican regulatory authorities it should be concluded by September when ICVL will take control of the Benga mine, in which Indian group Tata Steel has a stake of 35 percent.

Rio Tinto started operating in the Mozambican coal sector in 2010 when it acquired the operations of Australian company Riversdale for around US$3.5 billion, in a deal that was never taxed by the local authorities.

The company’s expectation for the Benga project fell sharply in the last two years, initially because of the mine’s coal reserves, which later tests showed did not correspond to those indicated by Riversdale, and, more recently, the Mozambican government’s refusal to allow the coal to be transported along the Zambezi river, as an alternative to the Sena railway or road transport.

Alongside these factors, the start of Rio Tinto’s exports, which increased its production by 230 percent [1.6 million tons] between 2012 and 2013, coincided with a drop in international coal prices and the company did not manage to maximise its profits due to transport costs and the country’s lack of capacity to transport the coal.

ICVL, which was created by the Indian government to acquire foreign coal mines, includes some of India’s largest public companies: Steel Authority of India Limited, Coal India Limited, Rashtriya Ispat Nigam Limited, National Minerals Development Corporation Limited and National Thermal Power Corporation Limited. ( macauhub/MZ)