It has been reported from New Delhi that India’s International Coal Ventures Private Limited (ICVL) was set to buy 65% of the Benga coal operation in the Tete province of Mozambique as well as two other coal projects – Tete East and Zambeze – from the Rio Tinto group for some $108-million.

The report, in the Wall Street Journal, cited an Indian government official, who spoke on condition of anonymity. The Anglo Australian group had refused to comment on the report. A mission from ICVL is known to have recently visited Mozambique. Rio Tinto acquired Benga for $4.1-billion, but has since had to write down $3.47-billion of that investment, and has been seeking to raise cash by selling assets regarded as noncore or as poor performers.

ICVL 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. It is a partnership between the Steel Authority of India Limited (SAIL), Coal of India Limited, 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 metallurgical coal requirements, while the figure for RINL is 100%. In total, India currently imports about 40-million tons of metallurgical coal a year.

Should the deal progress – and it might have been announced before Mining Weekly’s publication date – it would be the first acquisition by ICVL. It would thus be the first step in the fulfillment of the company’s desire to acquire a total of some 500-million tons of metallurgical coal reserves by 2019/20. Benga’s output of both metallurgical coal and thermal coal came to 733 000 t during the first half of this year. Perhaps ironically, ICVL originally made a bid to acquire Benga from Australian junior Riversdale Mining, but lost out to Rio Tinto.

Meanwhile, separately, the Mozambique government is willing to help the coal operations in the country, which have been hit by the fall in global coal prices. But it has ruled out tax cuts. “We don’t believe that reducing tax will resolve the problem,” Mineral Resources Minister Esperança Bias told the Reuters news agency in Maputo. She was speaking on the sidelines of the Fifth Mozambique Coal Conference. “We don’t think that the tax system needs to be changed.”

Mozambique’s recoverable coal reserves are estimated at more than 2-billion tons and are rated as the fourth largest unexploited reserves in the world. Major investments by Rio Tinto and especially Brazilian major Vale have started the exploitation of these reserves and allowed the country to start becoming a coal mining and exporting centre. (Vale has invested not only in its Moatize mining operation, which it plans to reach an operating capacity of 22-million tons a year by 2017/18, but also in railways and ports, to get the coal to the customers.)

But the current depression in the market has caused Vale to say that it has to quickly cut costs to keep its Mozambican operations competitive. These suffered total losses of $44-million during the first quarter of this year. A key part of the problem is that Mozambique’s coal mines are some 600 km to 900 km from the nearest ports, while their competitor mines in Australia are only about 200 km from their ports. And Australian mines are also much closer to key markets in China.

“We’re studying this,” assured Bias. “We are working on it to see what can be done from our side.”