Railway traffic on Mozambique’s Sena line, used to convey coal (along with other cargo and passengers) mined in the Moatize basin, in Tete province, to the port city of Beira for export, was disrupted from the morning of January 7 to January 11, as a result of torrential rains. This was reported by the Empresa Portos e Caminhos de Ferro de Moçambique (better known as CFM), the national railways and ports company. Severe rains had previously halted traffic on the line for periods in 2013 and 2014.
This time, the damage was caused by torrential rains that started on January 1. The resulting flash floods swept away ballast and damaged aqueducts and culverts and undermined the track bed. The line was cut in three places. The damage occurred between kilometres 456 and 495, between the Moatize and Cambulatsisse stations.
The Sena line runs for 575 km and currently an average of 25 trains run on it every day, CFM rail director Boaventura Mahave told the Notícias newspaper in Maputo. Of these, usually seven or eight are coal trains, carrying a total of between 18 500 t and 21 000 t of coal daily. The four-day interruption in rail traffic will thus have delayed the transport of between 74 000 t and 84 000 t of coal.
Currently, a consortium of Portuguese companies (Mota-Engil and Edivisa) is busy with a €163-million project to upgrade the Sena line and expand its annual capacity from 6.5-million tons to 20-million tons. However, Brazilian mining major Vale, currently the main (but not the only) coal producer in Tete, is also creating an alternative rail route from Moatize, through Malawi, to the Mozambique port of Nacala.
In early December, Vale announced that it had sold 15% of Vale Mozambique to Japan’s Mitsui corporation for (on paper) $450-million. Mitsui could pay an additional $30-million connected to an “earn out” clause in the deal. On the other hand, a “claw back” arrangement in the deal could reduce the cost to Mitsui by $120-million. So, the final value of the deal could range from $330-million to $480-million. As Vale Mozambique owns 95% of the Moatize coal mines, Vale’s share in the Moatize operation is now 81%. Vale will invest its income from the deal in the expansion of the Moatize mine. Mitsui will also fund the completion of the mine expansion project, in proportion to its shareholding.
In addition, the Brazilian group sold half its shareholding in the Corredor Logístico de Nacala (CLN) company to Mitsui. CLN is the enterprise responsible for developing and operating the new railway link from Moatize to Nacala. Vale previously owned 70% of CLN, so the deal means that Vale retains 35%, Mitsui has 35% and the other shareholders 30%. Vale and Mitsui will share control of CLN.
The two deals are expected to be concluded this year. In its (English language) press release, Vale stated: [The] “transaction is essential for the continuity of our investment in Mozambique and Malawi as it provides funding for the completion of the Moatize project and of the [CLN]. It also supports Vale’s strategy of operating world- class assets, improves Vale’s balance sheet and eliminates future funding needs, whilst reducing Vale’s exposure to the project risk.”
Entirely separately, the owner and operator of Minas Moatize (not to be confused with Vale’s Moatize operation), Beacon Hill Resources, suspended the trading of its shares on the London Stock Exchange, Aim, on December 17 and went into administration in January, owing to a lack of finance. Minas Moatize, also in Tete province, has a production capacity of 1.8-million tons a year, but was put onto care and maintenance in June last year, owing to a lack of finance.