Mozambique and coal

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This article is part of the CoalSwarm coverage of Mozambique and coal
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Mozambique currently produces only a minor amount of coal. However, major global mining companies such as Vale and Rio Tinto are developing major coking coal export projects which could make Mozambique one of the world's major coal exporters. Some of the proposed new coal mines have included proposals for mine-mouth power stations as their primary markets. In May 2011 the Brazilian company Vale began coal production Moatize mine[1] and the following month Rio Tinto completed its takeover of Riversdale Mining which commenced the development of the Benga coal mine and has the title for the Zambeze Project.

However, the biggest constraint on Mozambique coal exports booming is the insufficiency of rail and port infrastructure. The existing Sena railway to Beira Port -- which was reopened with the assistance of funding from the World Bank -- has limited capacity, is built to a poor standard and is subject to flooding. Beira port is subject to silting, requiring constant dredging.[2] While the Sena railway has a nominal capacity of 6 million tonnes a year, in 2012 only three million tonnes was exported via it. In late 2012 the Mozambican state rail and port company Portos e Caminhos de Ferro de Moçambique (CFM) stated that it was considering upgrading the railway line to provide capacity of 20 million tons per year.[3]

Vale has a concession with the government of Mozambique to develop the Nacala Corridor project, a 912 kilometre long railway, to connect the Moatize mine with a new coal export terminal at Nacala. The project involves upgrading 682 kilometres of existing railroads and building a new 230- kilometre section.[4] Vale has allocated US$1.4 billion in 2013 for the "construction and ramp-up of our world-class integrated Moatize/Nacala coal operation." The projected capacity of the railway line is proposed to be 18 million tonnes a year and cost $4.4 billion and be completed in the second half of 2014. The company has also commenced a US$2 billion expansion of the Moatize mine to provide a capacity of 11 million tonnes a year.[5]

Overview

In a July 2010 investor presentation, the then Australian coal company Riversdale Mining, argued that Mozambique had the potential to become a major global supplier of hard coking coals and especially to Brazil, Europe, India and China. In 2010 the company stated that the current global seaborne coking coal market was 172 million tonnes of which Australia was the dominant supplier producing 110 million tonnes or a 64% share of the market. The U.S. exported 29 million tonnes (17), Canada 18 million tonnes (11%) with other countries such as Poland, China, Russia, New Zealand and other countries exporting 15 million tonnes.[6]

Based on November 2009 data from Wood MacKenzie, Riversdale stated that in 2025 the global seaborne hard coking coal market would have grown to approximately 307 million tonnes with Australia producing 154 million tonnes (50%), Mozambique 54 million tonnes (18%), Poland, China, Russia, New Zealand and other countries 46 million tonnes (15%), Canada 27 million tonnes (9%) and the US 25 million tonnes (8%).[7]

In particular, Riversdale Mining argued that major potential markets for coal from Mozambique were existing and planned blast furnaces in coastal China, India and Brazil and new coastal power stations in India. The company argued that Mozambique suppliers would have a freight advantage for power stations on the west coast of India over both South Africa and Australia. It also argued that supplies from Mozambique would represent a "long term supply diversification prospect".[8]

Existing coal mining projects

  • Moatize mine - The U.S. Geological Survey also reported that CVRD of Brazil (now Vale) "announced plans to spend $70 million on the development of the Moatize coalfield in 2007. The company planned to produce 12 Mt/yr of coking and thermal coal at the Moatize Mine starting in 2010. The coking coal was likely to be consumed by steel plants in Brazil; thermal coal would be consumed by a new coal-fired powerplant built by CVRD in Mozambique with a capacity of 1,500 megawatts. In the second phase of the project, CVRD planned to increase coal production to 20 Mt/yr. The life of the Moatize Mine was expected to be 35 years. Capital costs of the project were estimated to be between $1.2 billion and $2 billion."[10] In 2011 Vale Mozambique mined 620,000 tons of coal.[11]
The Moatize mine was officially inaugurated in May 2011, and has an estimated life span of 35 years. The first phase of the project will dig up 11-million tons of coal, of which 8.5-million tons will be metallurgical coal and 2.5-million tons thermal coal. [12] It was announced in November 2011 that Vale was going to spend $6 billion to expand the Moatize mine in the second half of 2014. The investment is aimed at increasing production from 11 million tonnes to 22 million tonnes per year.[13]
  • The U.S. Geological Survey also reported that "Central African Mining and Exploration Company plc (CAMEC) of the United Kingdom hoped to identify sufficient coal resources at its properties in the Tete Province to start a new mine by 2012. The company engaged in drilling at these licenses in 2007. CAMEC also formed a joint venture with Belde Empreendimentos Mineiros Limitada of South Africa for three licenses in the Zambezi Coal Basin in Tete Province."[10]
  • The Benga coal mine in Mozambique is a metallurgical coal mine which was initially commenced by Riverdale Mining prior to the company being taken over in June 2011 by Rio Tinto. Tata Steel is a 35% joint venture partner in the project.[14] The mine received government approval in January 2010.[15] Resources at Benga were estimated to be about 1.23 billion metric tons.[10]
In June 2011 Rio Tinto completed its takeover of Riversdale Mining.[16] Rio Tinto said it may add 25 million metric tons of Mozambique coal to its annual output after the takeover: “When you add it up, Rio will be potentially producing, by 2016-17, 25 million tons of product, both coking and thermal” coal, Riversdale Managing Director Steve Mallyon said.[17] Rio's Benga coal mine project in Mozambique, due to begin output in November or December 2011, will ship about 5 million tons of unprocessed coal and may expand to 20 million tons. Mallyon also flagged that Rio may keep a larger stake than the 10 percent to 12 percent proposed by Riversdale in the proposed $1.3 billion Benga Power Plant. Mallyon suggested that Eskom may purchase power from the proposed plant.[17]
  • On January 30, 2011, South Korean steel group Posco said it had agreed with Brazilian group Vale to the joint development of a coal mine in the in Tete province of Mozambique. In a statement, the group said that the coal mine could produce 11 million tons of coal per year, to be used for generating electricity.[18] While the news reports didn't specifically mention the mine name, the only mine that Vale is developing is Moatize mine. In a later story Reuters reported that POSCO denied the earlier report and said that "we don't have any plan to develop a coal mine in Mozambique with Vale and our earlier statement had factually wrong information".[19]
  • Beacon Hill Resources owns and operates the Minas Moatize coal mine. In 2012 Beacon Hill Resources produced just 54,432 mt of saleable coal. In April 2013 Platts reported that reported in its quarterly activities report that it had reached an agreement with the Mozambican government "allowing the government a 5% equity stake in the Minas Moatize coking coal project and giving it the option to acquire another 10% interest at fair market price." The company stated that in April it had signed a mining contract with the government which would "enhance the stability of the fiscal and regulatory environment for a period of 25 years."[20] The company reported that it had negotiated a rail access agreement with logistics company Portos e Caminhos de Ferro de Mocambique to receive 500,000 mt/year rail capacity on the Sena railway to Beira Port.[20]

Possible coal projects

On July 31, 2010, Mozambique state radio announced that about 1 billion tonnes of coal had been found in the Cahora Bassa district of the northwestern province of Tete. Prospecting for the mineral had been carried out by a company from Kazakhstan, which is interested in exploring the coal in the Chitima administrative post of Cahora Bassa. Mineral resources minister Esperanca Bias who told Radio Mozambique that a feasibility study, lasting for one and a half years, is under way, and exploration of the coal will start two years after. Large quantities of coal were also found in the Moatize district of the same province.[21] In August 2010 Jindal Steel & Power announced the discovery of coal reserves of 1.65 billion tonnes in Cahora Bassa district. It hopes to produce 2.5 million tonnes of coal a year as from 2011, rising to 7.4 million tonnes as from 2013. The three companies, plus a Mozambican company, Carvoeira de Samoa, are also exploring in Mutarara, Maravia, and Zumbo districts.[22]

  • The Zambeze Project is coal project being considered by the Australian coal company, Riversdale Mining. The project adjoins the Benga coal mine, which is currently under construction.[23] The Zambeze Project is estimated to have reserves of 1.7 billion tons, may produce 42 million tons a year, rising to as much as 90 million tons of unprocessed coal, making it one of the world’s largest coal mines.[17] In September 2010, coal deposits were confirmed in the districts of Changara, Cahora Bassa, and Magoe, in the western Mozambican province of Tete, as a result of exploration undertaken since 2008 by the companies Jindal Steel & Power, Essar and Eta Star, according to the provincial director of mineral resources and energy, Adelaide Pedro de Jesus. Jindal Steel and Power Limited and the Essar group are Indian companies, while ETA Star is based in Dubai.[22]
  • On Feb. 4, 2011, Mozambique said it awarded the Indian company, Jindal Steel & Power, a 25-year licence to explore and mine for coal in the northwest Tete province. Jindal will invest $180 million in the Tete coal mine, as part of a project that will cover 2,1540 hectares. The government will own a 10 percent stake.[24] In October 2011, Jindal Steel & Power received approval from the government of Mozambique to build a 2,640 megawatt coal-fired power plant in the Tete province. Under the agreement, power generated from this plant will be sold to Mozambique and the southern African region. The coal plant is expected to cost around $3 billion, and will be located in the districts of Songo and Changara. It is expected to be operational in 2015.[25]
  • In January 2011, it was reported that Coal India planned to import 10 million metric tons of coal from Mozambique over the next five years, where the company has prospecting rights to two blocks in the northwest of the country measuring 225 square kilometers (87 square miles). If viable coal deposits are found, the company claims that it intends to invest $400 million and employ 3,000 people to extract them. Coal India also wants to secure rights in five other exploration blocks, and export the coal to India through the port of Beira and perhaps - after 25 years - the Nacala port.[26]
  • The Ncondezi coal project is a $376-million project with a total Joint Ore Reserves Committee (Jorc)-compliant resource of 1.8-billion tons. Ncondezi’s first coal production is scheduled for the end of 2014 or early 2015, and has an estimated 37-year life-of-mine.[27]
  • It was announced in July 2012 that Anglo American agreed to buy a majority stake in a the Minas de Revuboe coal project in Mozambique for $555 million. The deposit is sandwiched between a mine owned by Brazil's Vale and a Rio Tinto project.[28]

Coal Infrastructure

Coal terminals

The map below at the bottom of this page shows the existing and proposed coal terminals in Southern Africa, including both South Africa and Mozambique. In Mozambique, only Beira Port currently provides coal facilities. The other Mozambique ports shown on the map are in various stages of development.

In March 2011, the then Australian company Riversdale Mining stated that it would invest $46 million in locomotives to carry coal from its Benga coal mine in Mozambique to Beira port. Riversdale will buy 11 locomotives and 200 railcars for the rail line. According to a Bloomberg report, the locomotives and railcars will probably be delivered in April 2011 before the mines starts exporting coal in September 2011. The Benga mine is expected to produce 5.3 million metric tons (mt) of metallurgic coal a year by the second half of 2011, some of it for the proposed Benga Power Plant. Output may rise to 20 million mt of met coal a year by 2013, of which 10 million mt will be exported. The project, jointly owned by Tata Power's Tata Steel, has an estimated coal reserve of 502 million mt.[29]

According to Riversdale's Managing Director Steve Mallyon a "scoping study", completed on a "Richards Bay-type" coal terminal in Mozambique in May 2011, looked likely. Richards Bay Coal Terminal is Africa’s largest coal terminal, with an annual capacity of 91 million tons. The location he was referring to was not reported.[17]

Nacala port is a possible location for a new export terminal for coal produced from the Moatize coalfield in Mozambique. A news report in 2009 cited Mozambique’s Transport Minister Paulo Zucula stating that the government had secured $500m from the Dutch government and the European Union to to build a new railway line from Moatize to the deep-water Nacala port by 2015.[30] In July 2011 it was announced that Vale began studies on building a coal terminal at Nacala port in northern Mozambique. The project is expected to cost about $1.5 billion.[31]

It has been reported that Mozambique's coal boom is occurring at a snail's pace as the country struggles to rebuild ports, roads and railways.[32]

August 2011: Coal reaches Beira port

Brazilian mining titan Vale reported in August 2011 that it delivered its first coal by train from its Moatize mine project to the Beira port and expects to export the coal in August 2011. The first train carried 2,200 metric tons of coal from Vale’s Moatize coal mine. Beira port is currently the only coal export port in Mozambique and is located at the end of the 660 kilometre-long Sena railway line which runs from Moatize, the current centre of the coal mining boom.[33]

Vale is the first of the major mining companies to start producing thermal and metallurgical coal from the Tete basin. The Moatize project will be able to produce up to 11 million tons of coal, 8.5 million tons of which will be metallurgical coal and 2.5 million tons thermal coal.[34]

Proposed coal-fired power stations

Prior to its takeover by Rio Tinto, Riversdale Mining touted the possibility of building the $1.3 billion Benga Power Plant, a proposed 2000 megawatt (MW) mine-mouth coal-fired power station associated with the Benga coal mine. Riversdale Mozambique Limitada, a subsidiary of the Australian coal mining company Riversdale Mining, have proposed that stage one of the project would be 500 MW power station with a later expansion.[35] The project received approval from the Mozambique government in January 2010.[36] However, following Rio's takeover of Riversdale there is some uncertainty about the project. In the course of the takeover negotiations, neither Riversdale or Rio mentioned the Benga Power Plant proposal. However, Rio Tinto's corporate strategy is focussed on its role as a mining company not as an independent power producer. (The company's power station interests extend only as far as projects supplying company aluminium smelters and remote mineral processing plants.)[37]

Following the takeover of the company, Mallyon also flagged that Rio may keep a larger stake than the 10 percent to 12 percent proposed by Riversdale in the proposed . Mallyon suggested that Eskom may purchase power from the proposed plant.[17]

In October 2011 it was announced that India's Jindal Steel & Power was to initiate studies on build a $3-billion 2,640-megawatt plant power plant in Mozambique's Tete province, powered by the region's vast coal reserves. The coal-fired power plant would produce electricity for Mozambique and neighbouring countries in a region.[38]

Articles and Resources

Sources

  1. "Brazilian Mining Giant Vale Starts Coal Production In Moatize, Mozambique" Bernama.com, May 24, 2011.
  2. Agnieszka Flak and Marina Lopes, "Poor railways, ports put brake on Mozambique's coal rush", Reuters, April 16, 2013.
  3. [www.macauhub.com.mo/en/2012/10/29/mozambique-state-rail-and-port-company-considers-increasing-capacity-of-sena-railroad/ "Mozambique state rail and port company considers increasing capacity of Sena railroad"], Macauhub, October 29th, 2012.
  4. Vale, "Railroads: Nacala Corridor", Vale website, accessed May 2013.
  5. Vale, [http://www.vale.com/EN/investors/investments/Capex/Capex/120312Capex2013_i.pdf "Vale: Capital and R&D Expenditures Budget of US$ 16.3 billion to 2013", Media Release, 3 December 2012.
  6. Riversdale Mining, "Investor Presentation", Maputpo, July 2010, page 4.
  7. Riversdale Mining, "Investor Presentation", Maputpo, July 2010, page 5.
  8. Riversdale Mining, "Investor Presentation", Maputpo, July 2010, page 9.
  9. Thomas R. Yager, "The Mineral Industry of Mozambique: 2009, U.S. Department of the Interior, U.S. Geological Survey, January 2011.
  10. 10.0 10.1 10.2 10.3 Thomas R. Yager, "The Mineral Industry of Mozambique: 2007, U.S. Department of the Interior, U.S. Geological Survey, February 2009.
  11. "Vale Mozambique Mined 620,000 Tons Coal in 2011, Noticias Says," Bloomberg, January 6, 2011.
  12. Reggie Sikhakhane, "Mining boom to boost Africa’s infrastructure programme and economy" Mining Weekly, November 4, 2011.
  13. "Brazilian miner Vale to spend $6 bn in expanding Moatize coal project news" Domain-B.com, November 25, 2011.
  14. Riversdale Mining, "Riversdale Mining", Riversdale Mining website, accessed January 2011.
  15. "Riversdale Receives EIS Approval in Benga Coal Project", Statement to the Australian Stock Exchange, January 11, 2010.
  16. Rio Tinto, "Rio Tinto to move to compulsory acquisition of Riversdale", Media Release, June 17, 2011.
  17. 17.0 17.1 17.2 17.3 17.4 Carli Lourens, "Rio May Add 25 Million Tons of Mozambique Coal Through Riversdale Takeover" Bloomberg, June 20, 2011.
  18. "South Korea’s Posco group joins Brazil’s Vale for coal mining in Mozambique" macauhub, Jan. 31, 2011.
  19. Miyoung Kim, "POSCO says no plan to develop coal mine in Mozambique", Reuters, February 1, 2011.
  20. 20.0 20.1 "Beacon Hill enters into mining contract with Mozambican government", Platts, April 30, 2013.
  21. "One bln tonnes of coal found in Mozambique", Xinhua News Agency, August 1, 2010.
  22. 22.0 22.1 "Mozambique: Coal in Three More Tete Districts" AllAfrica, September 28, 2010.
  23. Riversdale Mining, "Mozambique Tenements", Riversdale Mining website, accessed January 2011.
  24. "India's Jindal wins 25-yr coal licence in Mozambique" Reuters, February 4, 2011.
  25. "Mozambique government approves JSPL's 2,640 MW coal-fired power plant news" Domain B, Oct. 4, 2011.
  26. "Coal India to Import 10 Million Tons of Coal From Mozambique Over 5 Years", Bloomberg, January 9, 2011.
  27. Reggie Sikhakhane, "Mining boom to boost Africa’s infrastructure programme and economy" Mining Weekly, November 4, 2011.
  28. "Anglo moves into Mozambique coal with $555 mln deal" Reuters, July 24, 2012.
  29. "Riversdale Invests in Locomotives for Mozambique Coal Line" Coal Age, March 24, 2011.
  30. "Mozambique To Build New Coal Railway Line To Ship Coal Mine From Moatize Mines To Nacala Port", Mining Exploration News, October 6, 2009.
  31. "Vale Starts Study on Coal Terminal at Mozambique’s Deepwater Nacala Port" Fred Katerere, Bloomberg, June 5, 2010.
  32. "Mozambique gears up to become coking coal hub" Agnieszka Flak & William Mapote, Reuters, November 21, 2011.
  33. "Mozambique coal rail line ready 2010-World Bank", Reuters, April 21, 2009.
  34. "Vale Mozambique Coal Reaches Port; Eyes Aug Export" WebWire, accessed August 11, 2011.
  35. Riversdale Mining, "Annual Report 2010", Riversdale Mining, September 2010, page 8.
  36. Steve Mallyon (Managing Director, "Riversdale Receives EIS Approval for Benga Power Plant", Statement to the Australian Stock Exchange, January 18, 2010.
  37. Rio Tinto, "Group power plants:Information on Group power plants", Rio Tinto Annual Report 2009.
  38. "Mozambique lets Jindal study $3 bn power plant" AFP, October 4, 2011.

Maps

Proposed and existing coal terminals in Mozambique and South Africa

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