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Vale reports increased production in Mozambique while Tata Steel decides to leave

27th February 2015

By: Keith Campbell

Creamer Media Senior Deputy Editor

  

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Brazilian mining major Vale has reported its Moatize coal mine, in Mozambique, set a new production record last year. This was revealed in the group’s recently published ‘2014 and 4Q14 Production Report’. It also set a new record for quarterly production during the fourth quarter (4Q). It further revealed that the new Nacala railway link had started limited operations.

Total coal production from Moatize, which lies in Tete province, was 4.908-million tons last year. Of this, 3.124-million tons was metallurgical (or coking) coal and 1.784-million tons was thermal coal. Total production was 1.1-million tons higher than in 2013. For Q4, total production was 1.433-million tons, which was 10.6% higher than the figure for the third quarter (3Q). It also represented a jump of 111.4%, compared with production during Q4 of 2013. Production in 4Q 2013 had been hurt by a lack of explosives.

“The ramp-up of the first phase of the Moatize coal project is currently restricted by the logistics infrastructure – railway and port – which does not allow for total use of the mine’s nominal capacity of 11 Mtpy (million tons per year),” stated Vale in its report. “Gradually, the above-mentioned logistics bottleneck will be eliminated as we complete and ramp up the Nacala logistics corridor.”

Vale originally owned 95% of Moatize but in December it announced it had sold 15% of its local subsidiary, Vale Moçambique, to Japan’s Mitsui corporation. This means that Vale now holds 81% of Moatize, although this is of no relevance to the 2014 results. Vale will invest its income from this deal into the expansion of the mine. The mining group also sold half of its holdings in Corredor Logístico de Nacala (CLN), the company responsible for developing the railway link from Moatize, through Malawi, to the Mozambique port of Nacala. This will be provide an alternative to the existing and still inadequate Sena line from Tete to the coastal city of Beira. As a result, Vale will own 35% of CLN, Mitsui another 35% and the other shareholders will have 30%. Both deals will be concluded this year.

“In 4Q14, Vale completed the greenfield sections of the railway and successfully transported the first coal cargo all the way from Moatize to the Nacala-a-Velha port,” noted the report. “Some brownfield sections in the railway which are still being upgraded shall be completed by 3Q[20]15.”

Vale’s only other operational mine in Africa is the Lubambe operation, a copper mine in Zambia. This is a joint venture (JV) with South African group African Rainbow Minerals. The JV holds 80% of Lubambe, the other 20% belonging to the State-owned Zambia Consolidated Copper MInes Investment Holdings.

“Lubambe . . . is ramping up and delivering 6 000 t of copper in concentrates on a 100% basis (attributable production of 2 400 t),” reported Vale. “Lubambe has a nominal capacity of 45 000 t per year.”

Meanwhile, Indian private- sector group Tata Steel has revealed that it will make no further investments in the Benga coal mine, which is also in Tete, in which it has a 35% share. Further, the steelmaker is planning to sell its holding in the operation. “We don’t want to spend more money on this asset,” group MD for India and South-East Asia TV Narendran told the Mint newspaper in India.

The majority shareholder in Benga is now Indian State-owned company 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. One of the shareholders in ICVL is the Steel Authority of India Limited (SAIL). Narendran reported that his company has already informed SAIL of its decisions on Benga. “For them,” he said, “there may be an upside because they got in cheap . . . whereas, for us, it is only a commercial call [on when to exit].” ICVL bought its 65% share in Benga last year from global mining major Rio TInto, reportedly for just $50-million.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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