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Indian group recommits to Mozambique as Irish miner restructures

13th March 2015

By: Keith Campbell

Creamer Media Senior Deputy Editor

  

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Private-sector Indian group Jindal will remain in Mozambique, even though the international price of coal has fallen significantly. This assurance has been given by Jindal Africa director-general Chandra Singh. “It is good that there is an awareness of the difficulties through which the international coal market is passing, which has recorded a sharp fall in price,” he told the Mozambique media recently. “Despite this, Jindal is committed to remain in the Mozambique market and to continue to produce.”

The average world price for coal has fallen from $250/t to $100/t. Consequently, the company is taking steps to cut its operating costs. These include the internal restructuring of the business and the ending of contracts with subcontractors. Jindal Africa operates the openpit Chirodzi mine, in the province of Tete. A predominantly metallurgical (or coking) coal operation, it currently has a production capacity of three-million tons a year and total coal reserves of 1.35-billion tons. Although Chirodzi is linked to the rail network (it has its own 8-km-long railway siding) and the company possesses its own railway locomotives and wagons, the operation has, like other coal operations in Tete, suffered from the capacity limitations of the Sena railway from Tete to the coastal city of Beira.

Singh’s reassurance followed reports of other Indian groups deciding to pull out of coal projects in the African country. In February, private-sector group Tata Steel announced that it would make no further investments in the Benga coal operation, in which it has a 35% stake, and that it was planning to sell that shareholding (see Mining Weekly February 27, 2015). A little earlier, Indian media reported that State-owned group Coal India was going to end its coal project in Mozambique (see Mining Weekly February 20, 2015). The Macauhub news agency has since reported that the final decision will be made in September.

However, Coal India has announced that its board had directed the company to withdraw from International Coal Ventures Limited (ICVL). This is a special-purpose vehicle created at the initiative of the Indian Ministry of Steel, with the purpose of obtaining metallurgical and thermal coal assets in foreign countries, in order to assure the supply of imported coal.
Apart from Coal India, its other shareholders are the Steel Authority of India Limited, Rashtriya Ispat Nigam Limited (a steel company), the National Mineral Development Corporation and NTPC (India’s largest power producer). All these companies are wholly or predominantly State-owned. ICVL owns 65% of the Benga operation and 100% of the Zambeze and Tete East coal projects (also in Tete). It had earlier been reported in India that Coal India regarded ICVL as a financial burden that did not bring equivalent benefits.

Completely separately, Irish miner Kenmare Resources reached an agreement with the Mozambique Ministry of Labour to dismiss 161 workers from its heavy mineral sands operation at Moma, in Nampula province. The job cuts are the consequence of the fall in global prices for its products – ilmenite, rutile and zircon. Last August, the enterprise announced an operational loss of $13.5-million for the first semester of 2014, as a result of the market conditions.

This led the company to engage in a major cost-cutting programme, which, in the end, had to include job losses. Originally, Kenmare stated that it might have to cut as many as 375 jobs, or about 20% of the workforce. The workers who will lose their jobs will receive 30-days notice and will be given a compensation (retrenchment) package, in accordance with Mozambique law.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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