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Mozambique Mining: Vale casts doubts on propaled target regarding 100 million tonnes of coal a year

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Pedro Gutemburg, the new chairperson of Vale Mozambique, the local subsidiary of the Brazilian mining giant Vale, has cast doubt on the frequently quoted figure that Mozambique could, in the medium term, be exporting 100 million tonnes of coal a year.

In an interview published in Monday’s issue of the Maputo daily “Noticias”, Gutemburg said this was an extremely ambitious target. What would determine how much coal Mozambique mines and exports is the existence of a market, and whether Mozambique is competitive on that market, he pointed out.

“The world market for coking coal is 300 million tonnes a year”, he said. “Australia, which is the largest producer, has 160 million tonnes, and there are other producers such as Canada, the United States and Russia, with about 40 million tonnes”.

“It’s no good producing 100 million tonnes of coal, of you have nowhere to sell it”, he stressed. The fact that Mozambique had large coal reserves did not mean very much, if Mozambican coal was unable to compete on the world market.

Last Friday Vale-Mozambique announced that it had made an operational loss of over 44 million US dollars in the first quarter of this year.

This did not mean that Vale was about to abandon coal mining in Mozambique. “The investments we have under way are very large”, said Gutemburg, and Vale was a company that took into account “long term commitments”.

Nonetheless, “what we are clearly posing is that this is a warning, not just for Vale but for the country”, he said. He wanted a discussion of “the coal production system in Mozambique”, and thought Vale should lead this discussion as the company with the largest investment in Mozambican coal.

“The entire world is looking at the results Vale has in Mozambique”, he claimed. “If they see that every time there is a quarterly report, we post losses, that could hold back investment in the country”.

Gutemburg warned that Vale might have to make redundancies. “We cannot guarantee 100 per cent of our employment at a time when we are losing a great deal of money”, he said.

Sacking workers was not part of Vale’s strategy, he insisted, but if losses continued for a long time “we shall be forced to be more efficient”.

The main reason for the losses is certainly the fall in coal prices on the world market. The price of Australian coking coal, regarded as the best in the world, was almost 350 US dollars a tonne in 2011, but last week fell to below 100 US dollars a tonne.

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