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Indian company to rapidly increase production at Mozambique mine

15th August 2014

By: Keith Campbell

Creamer Media Senior Deputy Editor

  

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Indian State-owned overseas coal mining group International Coal Ventures Limited (ICVL) has reported that it plans to triple pro- duction at its soon-to-be acquired Benga mine, in Mozambique, over the next three years. The company recently agreed a deal with Anglo-Australian group Rio Tinto to buy its share of Benga, an opencast operation in the African country’s Tete province, for $50-million. The deal should be concluded within the next two months.

Rio Tinto currently holds 65% of Benga, which it acquired from Australian junior Riversdale Mining in 2011 for $4.1-billion. However, since then, the global mining group has had to write down $3.47-billion of that investment. Perhaps ironically, ICVL originally made a bid to acquire Benga from Riversdale, but lost out to Rio Tinto. The remaining 35% is held by Indian private-sector group Tata Steel.

Tripling production will take Benga’s output up to 13-million tons a year (Mt/y). ICVL will be able to profitably produce coal at the mine and ship it to India by employing a “secret recipe”, company chairperson CS Verma told the Reuters news agency in New Delhi. “I will not be able to tell you what the recipe is but we will have operational control that will provide us [with] coal security in a cost effective way.”

Currently, ICVL plans to use the existing infrastructure in Mozambique to transport and export Benga’s coal. The company is also willing to take part in railway and port development projects, if required. Currently, coal from Tete province is usually transported to the port of Beira along the Sena railway line.

Reuters reports that the current capacity of the Sena line is 6.5 Mt/y, but that this is rarely achieved owing to technical faults and floods. Likewise, Beira’s capacity of 6 Mt/y is also rarely achieved as it is also vulnerable to flooding and suffers from high costs caused by the need for frequent dredging. Further, the news agency has quoted Indian private-sector group Jindal Steel & Power chairperson Naveen Jindal as saying recently that the cost of transporting 1 t of coal from its Chirodzi mine, in Tete province, to Beira is $60, whereas the mine-to-port cost in Australia is $10/t.

ICVL is a special purpose vehicle created on the initiative of the Indian Ministry of Steel to obtain metallurgical and thermal coal assets in foreign countries in order to assure the supply of imported coal. It is a partnership between the Steel Authority of India Limited (SAIL), Coal of India, Rashtriya Ispat Nigam Limited (RINL – a steel company), the National Mineral Development Corporation and NTPC (India’s largest power producer). All these companies are wholly or predominantly State-owned.

Currently, SAIL has to import 75% of its metal-lurgical coal requirements, while the figure for RINL is 100%. In total, India currently imports about 40-million tons of metallurgical coal a year. The acquisition of Benga is a major step in ful- filling ICVL’s mandate. The Mozambique operation has reserves of 2.6-billion tons, 70% of which is metallurgical coal, used in making steel.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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