Indian State-owned overseas coal mining company International Coal Ventures Limited (ICVL) will restart operations at its Benga mine, in Mozambique’s Tete province, during the course of this year.

This was disclosed to the Press Trust of India (PTI) last week by Steel Authority of India Limited (SAIL) chairperson PKSingh. Mining at Benga had been suspended in December 2015, due to low coking coal prices. The mine has reserves of 2.6-billion tons, 70% of which is metallurgical coal, used in making steel.

SAIL is one of five Indian State-owned companies that formed ICVL as a joint venture (JV). It was created at the initiative of the Indian Ministry of Steel as a “special purpose vehicle” to obtain metallurgical and thermal coal assets in foreign countries, in order to assure the supply of coal to India. The other companies that are partners in ICVL are Coal of India Limited, Rashtriya Ispat Nigam Limited (better known as RINL – a steel company), the National Mineral Development Corporation (NMDC) and NTPC (India’s largest power producer).

Back in August 2014, SAIL’s financial director, Anil Chaudhary, reported that Benga’s production costs were $165/t while the then market price was around $130/t, meaning that Benga was then losing about $35 on every ton it produced. Things got much worse in the months that followed. “The prices of metallurgical coal came down to less than $80,” Singh told the PTI. “The cost of production was more than that. That is why we stopped [mining]. In the next few months . . . we are going to start the ICVL operations because the prices of coking coal have increased.”

From a low of $80/t in January last year, the coking coal price rose to $283/t in December and was $193/t in early January, according to the Indian Steel Association. However, no commercially viable market for the Benga’s thermal coal has been found, with the result that NTPC announced it wanted to leave the ICVL JV. Subsequently, Coal of India also stated it wished to withdraw from ICVL. However, both require approval from the Indian government to exit the JV, and this has not yet been forthcoming. ICVL’s biggest shareholder is SAIL, which holds 46.63% of the JV.

ICVL bought a 65% stake in Benga (and 100% of the undeveloped Zambeze and Tete East coal projects) in 2014, from Rio Tinto, for $50-million. (The remaining 35% of Benga is held by Indian private-sector group Tata Steel.) Benga, which was already in operation, was suffering cash losses when it was acquired by ICVL.

Rio Tinto itself originally acquired Benga from Australian junior Riversdale Mining for $4.1-billion, but subsequently had to write-down $3.47-billion of that investment, and had to raise cash by selling assets regarded as noncore or as poor performers. The Benga project also suffered from transport difficulties, hampering the export of the metallurgical coal it was producing.

Riversdale’s original idea of shipping it down the Zambezi river in barges proved impractical, while the railway infrastructure was then completely inadequate to meet the demand. Although Singh did not mention it, the rail coal transport capacity from the Tete coal fields is now significantly greater than it was in December 2015, with the completion of the Nacala Logistics Corridor (a project spearheaded by Brazilian miner Vale), meaning that there are now two railway lines to the coast, to the ports of Beira and Nacala.