Name and Location
Benga coal project, Mozambique.

Client
Benga is operated by Rio Tinto Coal Mozambique (65%) in joint venture with Tata Steel Limited (35%).

Project Description
The project is being developed in three principal stages to align with the completion and subsequent expansion of rail, port and river barging infrastructure in Mozambique.

The initial Stage 1 development, at 5.3-million run-of-mine (RoM) tons a year, will produce about 1.7-million tons of high-quality hard coking coal a year and 300 000 t/y of export thermal coal.

The Stage 2 expansion includes the installation of a second module of the coal handling and preparation plant and an increase in production to 10.6-million RoM tons a year, boosting output to 3.3-million tons a year of high-quality hard coking coal and two-million tons a year of export thermal coal.

The final stage is expected to increase coal production to about 20-million RoM tons a year, through the installation of two additional coal preparation plant modules. This will depend, among other things, on future coal market conditions, and the availability of port, rail and barging capacity at the time.

Value
Stage 1 – $270-million, excluding working capital.
Stage 2 – $150-million.

Duration
The first coal shipment of Stage 1 from the Benga mine left the Port of Beira on June 25, 2012.

The Stage 2 production will start no later than 2014 and will be timed to coincide with the opening of a new purpose-built multiuser coal terminal, as well as the start of barging operations.

Latest Developments
The reserves of metallurgical coal in Rio Tinto’s Benga project are smaller than originally believed.

Benga, operated by Rio Tinto Coal Mozambique, indicated in a press release to the Mozambican media that it had undertaken extensive prospecting on its mining sites since 2011, when it bought them from Australian junior Riversdale Mining. The analysis of the data gathered from this prospecting resulted in “a downward revision of the estimates of the recoverable volume of metallurgical coal in the mining areas . . . and also a re-evaluation of the scale that the turnover can reach”.

Inadequate transport infrastructure for the mined coal is problematic. Originally, RTCM planned to ship the coal on barges down the Zambezi river, but this did not receive the necessary government approvals. There were reportedly also problems with dredging the river.

“The combination of smaller volumes of recoverable metallurgical coal and the impossibility of increasing production as originally projected, owing to the limitations of infrastructure, resulted in a reduction of the book value of Rio Tinto Coal Mozambique and was recorded as an impairment in the accounts of Rio Tinto,” stated the company.

The impairment totalled $4-billion and resulted in the resignation of Rio Tinto group executive: strategy Doug Ritchie, who had overseen the acquisition of Benga. The Mozambique impairment formed part of total Rio Tinto impairments of $14-billion, which led to the recent resignation of group CEO Tom Albanese.

“[T]he production of coal by Rio Tinto Coal Mozambique is, currently, limited by the lack of transport infrastructure capacity,” admitted the company. It is in the “process of identifying alternative supply routes” and, in this regard, is “continuing to work with the Mozambique government”.

Nevertheless, the group continues to regard Rio Tinto Coal Mozambique as “in the last analysis, a valuable metallurgical coal business”. It will “continue to increase the production of metallurgical coal at Benga” because “it is a rare geological resource and without substitute in the steel industry”. Rio Tinto expects the metallurgical coal price will rise in the future because it expects a strong future demand for steel.

The company has begun a review of its Mozambique coal mining operations, reconsidering development plans, partners and its options for getting the coal from pit to port.

Key Contracts and Suppliers
MCC Contractors (mining contract for Benga stage 1); Sedgman Africa (CHPP design, supply and construction contracts); Ludowici (supply of two RC2020 reflux classifiers and lined piping); Cosira Group (supply contract for CPWP); and National Railway Equipment and TŽV Gredlelj (supply of diesel locomotives).

On Budget and on Time?
Not stated.

Contact Details for Project Information
Rio Tinto media contact, Tony Shaffer, tel +44 20 7781 1138, cell +44 79 2004 1003, fax +44 20 7781 1802 or email media.enquiries@riotinto.com.
Sedgman MD Mark Read, tel +61 7 3514 1000.
MCC Contractors, tel +27 11 990 6600 or fax +27 11 310 1988.
Ludowici, tel +61 7 3121 2900, fax +61 7 3121 2901 or email enquiry@ludowici.com.au.
National Railway Equipment, tel +618 241 9270 or fax +618 241 9275.
TŽV Gredlelj, tel +38516328500 or email gredelj@tzv-gredelj.hr.