Mozambique Mining: “Brighter future for coal industry ahead” – EIU report

Coal will be Mozambique’s top exportrevenue earner over the medium term, according to the Economist Intelligence Unit (EIU). This will be the result of improving security in the central region of the country and rising global coal prices. Details of the EIU report were released by Portuguese news agency Lusa.

“[A]fter a period in which prices hit rock bottom and securityrisks increased significantly, there is new wind in the coalindustry in Mozambique,” Lusa quoted the report as saying. The renewed optimism and effort on the part of miners in the country is justified for two reasons. “[T]he first is the international price, which recovered strongly since it hit, in the first quarter of 2016, the lowest point during the past ten years . . . [and the second is] the improvement of the securitysituation in the centre of the country, a measure which has caused the fears of attacks on the coal transportinfrastructure to fade.”

As a sign of renewed optimism in the country’s coal sector, the EIU cited the conclusion of the deal under which Japan’s Mitsui has bought a 15% share in the Moatize coal mine, in Tete province, which is majority- owned by Brazil’s Vale, as well as buying half of Vale’s share in the Nacala LogisticsCorridor, which will play a major role in transporting Moatize coal to the coast for export. Moatize was owned 5% by the Mozambique State and 95% by Vale, and is now held 5% by Mozambique, 80% by Vale and 15% by Mitsui. Vale had a 70% share in the Nacala Logistics Corridor, which has now fallen to 35%, with the other 35% becoming Mitsui’s.

“[J]ust the increase in production at the Moatize mine, from 8.7-million tons in 2016 to 13-million in 2017 and 18-million in 2018, will probably be enough for coal to overtake aluminium as the biggest source of export revenues for Mozambique this year,” stated the report.

Another sign of renewed optimism cited by the EIU was the fact that India’s International Coal Ventures Limited (ICVL) had announced that it would resume operations at its Benga mine, also in Tete. ICVL is a joint venture (JV) between several Indian State-owned companies, created at the initiative of the Indian Ministry of Steel as a special-purpose vehicle to obtain metallurgical and thermal coal assets in foreign countries, in order to ensure the supply of coal to India. The JV currently has five members: the Steel Authority of India Limited, Coal of India Limited, Rashtriya Ispat Nigam Limited (better known as RINL – a steel company), the National Mineral Development Corporation and NTPC(India’s largest power producer).

Further, India’s private-sector group, Jindal Power & Steel, has already restarted operations at its Chirodzi mine in October. Chirodzi also lies in the coal-rich Tete province.

Mozambique’s coal reserves are estimated at more than 20-billion tons. The country’s government has “repeatedly affirmed that Mozambique could be one of the ten biggest producers of coal . . . [A]lthough the coal industry is not immune to the trends dictated by China, the dynamic in India, the main export destination, is more important”.(source:Miningweekly/Lusa)