Two more companies have been granted coal mining concessions in the Tete province of Mozambique, despite the fall in global coal prices which have put the already operating mines in the province under pressure. The new concessions were granted to the Eurasian Natural Resources Corporation (better known as ENRC, largely based in Kazakhstan, but with head office in London) and to United Arab Emirates (UAE) group ETA Star.

At the concession award function, Mozambique Mineral Resources Minister Esperança Bias acknowledged that the country’s coal sector was going through a difficult time. However, she expressed confidence that the current trend of declining prices was only temporary and would change in the near future, the newspaper O País reported. “Investors continue to believe that Mozambique is a good investment destination,” she affirmed. “We want to encourage the whole mining sector, particularly the investors, to continue to believe that it is a good destination.”

Meanwhile, she noted that the sector will be involved in seeking solutions to increase the value of the coal that is not exported. Developing the domestic use of coal would create a balance between the home and export markets. She urged that the investors undertake their mining operations in a sustainable way which would ensure “a just return for the investor and a just return for the State which offers the resource for exploitation”.

The representatives of the two groups – José Dai of ENRC and Mubarak Hussein of ETA Star – both expressed the view that the efforts of their companies in developing Tete coal resources were praiseworthy given the difficulties posed by the low international coal prices. Both businesses believed that the market scenario would change for the better, sooner rather than later. “[W]e don’t expect it to remain low for long,” Hussein told the Mozambique News Agency AIM. “We see this as a long term investment.”

AIM also reported that both the ENRC and ETA Star mines in Tete would be opencast operations. The ENRC concession covers 23 860 ha in the Cahora Bassa district, while ETA Star’s concession is for 4 000 ha, located some 40 km from Tete city.

ENRC has set up a local subsidiary, in which it holds a 90% stake, with 5% assigned free-of-charge to the Mozambican State and another 5% to be made available to Mozambicans on the country’s stock exchange. The company has, so far, invested $180-million in exploration and plans to invest another $800-million in developing the mine. Full production capacity is expected to be 25-million tons/year (Mt/y) and the life-of-mine is predicted to be 25 years. However, unlike Vale’s Moatize and ICVL’s Benga metallurgical coal operations, the bulk – some 80% – of the ENRC mine’s output will be thermal coal, with only 20% or so being metallurgical coal. The project will create 500  local jobs.

Dai told AIM that the plan was to start off by converting the coal into “liquid fuel” which would be used to feed a 120 MW capacity power plant, which will be built immediately adjacent to the mine. The electricity produced will be sold locally and perhaps also exported to Zambia.

Subsequently, coal would also be exported, but this would require the construction of a new railway. ENRC is considering running a line from Chiuta through eastern Tete to join the Nacala line at Monapo, in Zambezia province. The distance involved is 1 200 km and the company believes the railway could be built in 36 months. However, Chiuta is on the north bank of the Zambezi, while the mine will be on the south bank, so a method of conveying the coal across the river must also be created.

ETA Star has also set up a local subsidiary, ETA Star Mozambique, in which the UAE group has a 75% stake, with 20% being held by the Mozambique government and 5% available for Mozambican investors. The company is investing $250-million in its Tete project. The mine is expected to start operating by the end of next year and 560 jobs will be created, 90% of them, the company guaranteed, going to Mozambicans.

Feasibility studies have shown that the concession area contains a resource of 1.9-billion tons of coal. Again, the operation will be focused on thermal coal, although metallurgical coal is also known to be present. However, further studies will be required to establish the amount and quality of that coal in the deposit. In its initial stage, the mine will produce 4 Mt/y of high-quality thermal coal, possible rising later to 10 Mt/y. The coal could be transported to the port city of Beira as a slurry in a more than 600-km-long pipeline. But no decision has yet been taken.