$1.7bn coal mining investment for Moz

9 May 2011

Brazilian mining giant Vale has opened a new US$1.7-billion (R11.39-billion) coal mine in Mozambique, tapping the southern African country’s thermal and coking coal reserves of around 23-billion tonnes.

Mozambican President Armando Guebuza and outgoing Vale chief executive Roger Agnelli opened the mine together on Sunday by pressing a button that triggered an underground explosion, enabling the company to bring to the surface its first coal from the mine in Moatize, outside the city of Tete in northwest Mozambique.

As a giant smoke cloud mushroomed over the hundreds of VIP guests, a large truck brought a symbolic load to a conveyer belt and onward to a coal washing plant.

“A dream of decades today becomes a reality,” said Guebuza.

Largest single investment

The $1.7-billion project is the largest single investment to date in Mozambique, one of the world’s poorest countries.

Vale plans to start production in July and export one-million tonnes of coal this year, ramping up output to 11-million tonnes in a few years – and, local officials hope, boosting Mozambique’s current economic growth of 6.5%.

Agnelli said the project would add as much as $3-billion to the economy.

“Africa means opportunities,” he told journalists.

Mozambique’s coal reserves have gone largely untapped since independence from Portugal in 1975. A civil war from 1977 to 1992 crippled the country’s economy and decimated its infrastructure.

Two decades later, Mozambique is welcoming foreign investors to its mineral wealth and licking its lips at the prospect of a boom.

In 2004, Vale became the first international mining giant to be granted a concession in Mozambique. At the peak of preparations, the company counted 7 500 workers, mostly Mozambican.

Australian mining company Riversdale, in a partnership with Indian companies Tata steel and Jindal Steel and Power, are also developing major coal mines in Mozambique.

Infrastructure concerns remain

But concerns remain about getting the product to market, as infrastructure renovation lags behind: “We are running at this stage to get the infrastructure ready for export,” said Agnelli, adding that exports would start in July, though railway authorities told AFP they would only be ready in August.

Mozambique is scrambling to finish a much-delayed rebuilding of the 600-kilometre Sena railway line that connects coal-rich Moatize to the Indian Ocean port city of Beira. The coal terminal at the port is also unfinished.

Even when ready, the Sena line will only be able to handle six-million tonnes of coal a year – four-million allocated to Vale and two-million to Riversdale – caps that are less than half the companies’ respective export goals.

Vale is investing in another railway line from Tete to the northern port of Nacala, the coutry’s only deep-water port and a gateway to Indian Ocean ports for Mozambique’s land-locked southern African neighbours.

The company is also funding the reconstruction of an international airbase in Nacala, Agnelli said.