Mozambique’s rapidly growing coal sector offers investors a promising future, with production from various projects expected to reach new buyers’ markets, states international broking house London Commodity Brokers (LCB) South Africa GM Bevan Jones.

This is as a result of the expansion of the existing coal basins in the Tete province and Zambesi area, with specific focus on coking coal, as well as the development of logistics and port infrastructure.

“There is great excitement over the country’s substantial coking coal reserves, as coking coal trades at a much higher price than thermal coal,” he adds.

The current price of thermal coal is about $100, while the price of coking coal is about $260.

Jones states that this validates the necessity of infrastructure investments such as the $200-million Sena railway line refurbishment.

“Privately owned role-players such as Australian mining house Riversdale Mining have been looking at constructing a barge route and slurry pipelines from Tete to the five ports, namely the ports of Beira, Maputo, Nacala, Pemba and Quelimane. Companies have also called on the Mozambique government to upgrade road infrastructure in the region between the coalfields and the Maputo port’s Matola Coal Terminal,” he states.

Jones believes these projects play a central role in promoting the future of the Mozambique coal sector, which is one of the world’s remaining significant coal basins in terms of quality and quantity.

“It is difficult to estimate what the country holds in terms of reserves. New deposits are still being explored and discovered; however, it’s safe to say that there are at least 40 to 50 years of reserves left in the ground,” he notes.

Challenges

As the Mozambique coal-trading arena is still at a developing stage, the key challenge is buyers’ unfamiliarity with the sector.
Jones suggests that this has resulted in buyers being hesitant, which is largely unwarranted, as coal deliveries out of Maputo have generally been consistent and reliable.

“Buyers tend to compare KwaZula-Natal’s Richards Bay Coal Terminal, the world’s single largest coal terminal, with the emerging Matola Coal Terminal, which takes smaller vessels and has a lower coal-loading rate. This means vessel freight per ton is more expensive. However, buyers receive a small discount for free-on-board Matola coal and are becoming more interested in sourcing from there,” he says.

Shipping and logistics group Grindrod recently expanded capacity at Matola to between six-million tons and seven- million tons, out of which five-million tons would be for coal and two-million tons for magnetite.

The company is now finalising the feasibility study for a further expansion of between 12-million tons a year and 16- million tons a year. The maximum capacity predicted for Matola is between 16-million tons a year to 21-million tons a year.

In June, Engineering News reported that a further $750-million would be invested in the Maputo port expansion over the next 20 years to grow export volumes to 50-million tons a year by 2030.

Over the past eight years, $225-million has been invested in the Maputo port and the Matola Coal Terminal, while cargo handled increased from five-million tons in 2003 to 12.6-million tons this year. Further planned investment would see volumes double in the next four years.

Coal Activity

Mozambique has substantial coal deposits situated in the Moatize and the Mucanha-Vusi subbasins in the prospective Zambezi coal basin, in Tete.

The Moatize subbasin contains seven coal seams and has reserves estimated at 750-million tons, while the Mucanha–Vusi basin is said to contain as much as 3 600-million tons in coal reserves, despite the basin being severely block faulted.

Coking coal mines in Mozambique include mining houses Rio Tinto’s Benga and Zambeze coal projects, Beacon Hill Resources’ Minas Moatize coal mine, Brazilian diversified miner Vale’s Moatize coal mine and Japanese steelmaker Nippon Steel Corporation’s Revuboe project.

Vale has, to date, spent $300-million on the development of its $1.3-billion Moatize coal mine. The first cargo of coal to be shipped from the Moatize coal operation, left the mine in August.

The first coking coal from the Benga project is expected by early 2012, with a major ramp-up of the mine due in 2013.

The proposed 247.4 km2 Zambeze project has an estimated coal resource of nine-billion tons. The total indicated coal resource includes about 2.3-billion tons. The project is estimated to start production in 2014.

Further, Nippon Steel Corporation expects to start producing coking coal at its Revuboe project, in Tete, in 2014, with development of the site expected to begin in the first half of 2012.

News source Reuters reports that the project is expected to churn out five- million tons a year when it reaches peak production.

Future

As the coal projects in Mozambique reach implementation, significantly more Mozambique coal will be shipped through the Maputo port, Jones expects.

“Currently, a lot of South African coal is shipped from the Maputo port owing to the Mozambique coal sector consisting largely of exploration projects. But as this region develops, it will start shipping more of its own coal,” he says.

The Matola coal terminal is the preferred option for Beacon Hill Resources, given its proximity to the company’s projects in Limpopo.

Further, he says that most of the exploration in Mozambique is done in the northern areas of Tete, which will result in the devel- opment of the Beira and Nacala ports.

Looking at LCB’s development, Jones points out that the company has expe- rienced significant growth in terms of the amount of Mozambique coal it handles. LCB currently handles four-million tons of coal exports through the Maputo port every year.

“This year, we doubled the amount of Mozambique coal we moved. The aim is to double it next year and we are well on track to achieving that,” he enthuses.

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