Brazil, India will spur coal output: Mozambique, blessed with plentiful natural resources, will soon be able to exploit its large coal reserves through a deal with a Brazilian company. India's Tata Steel is also poised to follow suit. Neil Ford reports.

Mozambique's success in re-establishing a viable economy since the end of the civil war in 1992 has been well documented. A decade of 10% growth annually enabled the country to rebound from the years of devastation.

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Improvements to port, rail and power sector infrastructure have helped the country resume trade with neighbouring states, while investment in the gas, aluminium and titanium sectors is helping the Southern African state to develop a relatively diverse economic base.

Now, a Brazilian company has revealed that it is to add another string to Mozambique's bow through a commitment to greatly expand coal production in the country.

Rio Doce Mocambique Ltd, the Mozambican subsidiary of Companhia Vale do Rio Doce (CVRD), has agreed to invest $1.5bn in developing the Moatize coalmine in the Moatize Basin in the western Mozambican province of Tete. The government estimates that the basin contains around 2.4bn tonnes of coal.

The minister of mineral resources, Esperanca Bias, says that mining will begin in 2010, with exports quickly reaching 8m tonnes a year; although CVRD could produce up to 26m tonnes of coal a year at Moatize in the longer term to supply its steel production plants in Brazil.

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The mine was established during the colonial era but was badly damaged during the civil war and large-scale investment in the site has failed to materialise over the past 15 years.

Mozambique already exports some coal from Matola Coal Terminal at Maputo and by rail to the neighbouring state of Malawi but the government believes that output could be much higher. Apart from export, it is possible that the coal could be used as a feedstock for domestic industrial consumers and thermal power plants.

Government spokesperson Luis Covane said: "Under the terms of the contract we have just approved, the area granted to this company will be exploited for a period of 25 years, renewable.

"The company has guaranteed that the training of technical staff, mobilisation of equipment and the construction of infrastructures will be completed in 36 months. That means exploitation of the Moatize coal will begin in 2010." CVRD will remain in control of the project but a 10% stake will be sold to Mozambican private sector investors and the government of Mozambique will take a further 5% share.

Boost for infrastructure

The investment will also boost demand for the port of Beira and the 670km railway that runs from Zimbabwe through Tete to the port. The railway is operated by the Beira Railroad Corporation (CCFB), which is mainly owned by two Indian companies, Rites and Ircon.

At present, Matola is the country's main coal handling terminal but new facilities must now be added to Beira. The first section of the Beira railway between Beira and Dondo is due to open at the end of this year. Aside from carrying coal, it is expected that the line will transport sugar, timber from Cheringoma and limestone from Muanza in the first instance, while copper, gold and diamond mining companies could also make use of the line in the longer term.

Like the mine, the railway was damaged in the war and services were halted in 1984 but it is gradually being brought back into use. The US provided a $13m grant to fund the removal of mines along the railway between 2002 and this year and the track infrastructure is being overhauled.

Sources in Mozambique indicated that the spur line in the Zambezi Valley will also open as far as Marromeu at the end of this year, providing an outlet for the valley's sugar plantations. The railway is scheduled to be open as far as the Moatize mine by 2009, and the final section to Zimbabwe, plus a spur line to Malawi, shortly thereafter.

Tata to follow CVRD

Further investment in the Mozambican coal sector is to come from Indian firm Tata Steel. In August, the company signed a memorandum of understanding with Riversdale Mining, an Australian mining finance company, for a 35% stake in a mining venture in Mozambique.

The company paid the equivalent of $844,000 for the asset and the two companies now plan to jointly develop the planned mines at Benga and Tete. Riversdale is on the verge of completing its final feasibility study for the venture and the final investment decision is due to be taken at the end of November.

The managing director of Tata Steel, Mr B. Muthuraman, says that the Riversdale agreement was in line with his firm's strategy of improving its raw material security. He commented: "This partnership gives Tata Steel an opportunity to jointly explore part of a large coal basin which would prove to be a potential source to meet part of the raw material requirement and enhance the long-term competitiveness of the global operations." The Benga and Tete concessions cover a total of 24,960 hectares.

Tata has set up a mineral exploration group to acquire coal and iron ore assets around the world to feed its huge expansion programme. The Indian firm has taken over Corus steel company in the UK and the Netherlands, and hard coking coal from the Mozambican mines will be shipped to Corus steel manufacturing plants in the UK, as well as in India.

Apart from Tata, Riversdale and CVRD, other companies, including JSW Steel, have also secured coal exploration licences in Mozambique.

The growing mining sector will provide a further source of export income and should create a large number of well paid jobs. There is certainly plenty of mining sector experience within the country as many Mozambicans have worked in South African mines. The scale of the new industry will depend on the size of the reserves discovered but there is no doubt that another major sector is emerging.

RELATED ARTICLE: South Africa 

New development for Waterberg coal

The long neglected Waterberg coal reserves in South Africa are finally to be seriously developed. Most of South Africa's established coalmines are located in Mpumalanga Province and benefit from a direct rail link to Richards Bay Coal Terminal (RBCT) and are also used to supply feedstock to coal fired power plants within the province.

The Waterberg coal fields, however, lie in Limpopo Province, far from the main domestic coal markets and also the country's coal exporting ports and main railways. Their isolation plus plentiful reserves elsewhere has deterred large-scale investment until now.

However, mining giant Kumba Resources has finally decided to exploit the fields and has reached a deal with rail operator Spoornet--which was renamed Transnet Freight Rail (TFR) in a Transnet rebranding exercise in July--to greatly boost transport capacity on the railway that currently serves limited coal mining operations in the region.

A new spur line will be constructed from Lephalale in the Waterberg region to the main Mpumalanga to RBCT railway, with transport capacity of 12m tonnes a year, while 110 new engines will be provided for use on the line.

Production from Kumba's Witbank mines in Mpumalanga Province has begun to fall and the company hopes that new investment in the Waterberg area, where it is already the main producer, can maintain its overall production capacity, particularly as South African national coal output is set to rise to make the most of the expansion of RBCT. Waterberg Basin is believed to hold a large proportion of South Africa's remaining coal deposits.

At present, the firm operates the only commercial operation at Waterberg, the Grootegeluk mine, which is the cheapest cost mine in South Africa. The low cost of production at the site, using relatively low cost opencast methods, compensates for the higher costs in transporting the coal to the required markets.

Kumba exports 2m tonnes of coal a year from Waterberg, mainly semi-soft coking coal to European and Brazilian customers, plus coal powder for pulverised coal injection in blast furnaces. It also supplies Eskom's Matimba thermal power plant, which is located next to the coal mine. Production will now be increased to at least 12m tonnes a year but the company is keen to point out that the increase will be gradual.

The general manager of Kumba Coal, Ernst Venter, commented: "The timing of the expansion depends on how successful the other guys [in Mpumalanga] are in replenishing their reserves. If they extend the life of some of their mines it will be a bit later. It will come; it is just a question of how we pace it. Some Witbank reserves will become unmineable in 10 years and you need to fill up the 92m tonnes at Richards Bay Coal Terminal."

However, the chief mineral economist at the department of minerals and energy, Xavier Prevost, believes that production at Waterberg will only be economic if a second 3,600MW coal fired power plant is constructed on the field.

He said: "The decision on the second power station is critical. It will make the Waterberg feasible or not. There needs to be a second power generation unit, and then Kumba's second mine could be started. Their reserves will almost double in size. However, if you don't have Eskom you can't export or move into the rest of the coal, you can't mine it selectively and stockpile. You have to mine it all and use it all." It remains to be seen if Eskom will agree to develop a coal fired plant of that scale at the site.

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