KOLKATA (miningweekly.com) - A final decision on producer Coal India Limited (CIL) aborting its Mozambique investments will only be taken in September or October, after the impact on diplomatic and economic bilateral relations between the two countries has been assessed.
According to government officials, CIL’s "unofficial" decision not to pursue investments in the Mozambique coal block, as exploratory mining did not yield "mineral which could be categorised as coal", would be supported from a commercial viewpoint.
Simultaneously, considering that the Indian miner’s maiden overseas acquisition was backed by the Mozambique government and part of growing economic bilateral relations between the two countries, an international relations viewpoint would also need to be factored in before CIL, which is a majority government-owned miner, made a final call, the official said.
The official, however, declined to give any specifics on the possibility of salvaging the investments adding that a commercial decision would be the responsibility of CIL management while bilateral international issues would be taken up by the Coal Ministry and the economic wing of the Foreign Affairs Ministry.
Therefore, contrary to reports, a firm decision on CIL scrapping its investments would need the final nod from the government, he added.
In 2009, CIL acquired a six-year exploratory licence for the A1 and A2 blocks in Mozambique’s Tete province. However, the $80-million exploratory investments did not yield any coal. According to a CIL official, samples tested from exploration indicated that the mineral mined was so low grade that it could not be categorised as coal.
Earlier this year, the Indian miner took an internal decision not to pursue the development of the blocks, as initial assessment that 20% of the reserves could yield high-grade coal for steel smelting while the balance would be thermal grade coal, had not stood up to exploratory scrutiny.
The Indian government’s caginess over CIL aborting its African venture stemmed from growing India-Mozambique collaboration in the energy sector.
In November 2014, a government-to-government memorandum of understanding was signed for a six-year cooperation in oil and gas. From the Indian side, the government sought the Mozambique government’s cooperation in the award of oil and gas fields in the African nation.
Indian overseas oil exploration and production major ONGC Videsh Limited earlier this month awarded a contract for the construction of a liquefied natural gas terminal in Mozambique, linked to its Rovuma oil and gas fields in which it held a 30% stake.
Any commercial decision by CIL to dump its investments in the Tete coal blocks would have to be balanced by taking into account the "sensitivities" of the Mozambique government and hence it was "prudent to take time before taking a definitive decision", the officials said.