Brazilian mining giant Vale opened a new US$1.7 billion coal mine in Mozambique yesterday, tapping the southern African country’s thermal and coking coal reserves of about 23 billion tonnes.
Mozambican President Armando Guebuza and outgoing Vale chief Roger Agnelli attended the opening ceremony in Moatize outside the city of Tete in northwest Mozambique to mark the largest single investment to date in one of the world’s poorest countries.
Vale plans to start production in July and export 1 million tonnes of coal from the US$1.7 billion project this year, ramping up production to 11 million tonnes in a few years — and, local officials hope, boosting Mozambique’s current economic growth of 6.5 percent.
Mozambique’s coal reserves have lain relatively 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.
Australian mining company Riversdale, in a partnership with India’s Tata steel, will also start operations later this year at a nearby coal mine, hoping to produce 6 million tonnes a year by 2016.
Mozambique signed a third large coal contract with India’s Jindal Steel and Power in February. The company hopes to produce 11 million tonnes a year when the mine opens next year.
However, transport issues still loom large over the country’s plans for an export boom.
Reconstruction of the 600km Sena railway line that connects coal-rich Moatize district to the Indian Ocean port city of Beira is still not finished, forcing authorities to reconsider their contract with Indian consortium Ricon.
Though work is also unfinished on the coal terminal at the port, officials have sought to reassure that the mining giants will be able to get their product to market.
“Exports will start in the second semester,” Mozambique Central Railway Services head Candido Jone said. “There are some problems, but it is still working.”
Even when ready, the Sena line will only be able to handle 6 million tonnes of coal a year — 4 million allocated to Vale and 2 million to Riversdale.
Those caps 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. The company last month signed a deal with Malawi to build about 100km of the line across the country’s southern end, giving it a straight shot to the sea.
Vale broke ground on the Moatize project in March 2009.
Exiting chief executive Agnelli, whose departure was announced last month after weeks of rumors that the Brazilian government, a major shareholder, was demanding change at the top, has overseen the project since the company won the concession seven years ago.
This is expected to be his last trip to Moatize before handing the reins to former company executive Murilo Ferreira on May 22.