Unable to find customers for the thermal coal it is producing at its Benga mine, in the Tete province of Mozambique, Indian company International Coal Ventures Limited (ICVL) has been looking for companies willing to establish chemical and power plants at the mine.
These would use the thermal coal as their feedstocks. As a result, the miner has now received expressions of interest (EoIs) from four companies, which have not yet been identified.
ICVL Mozambique MD Nirmal Chandra Jha told the BusinessLine section of The Hindu newspaper in India that two of the EoIs were for a chemicals plant and two for a power station. While the power plant would obviously burn the coal to produce electricity, the idea for the chemicals plant was that the coal would be used to produce ammonium nitrate, which, in turn, would be used to manufacture fertilisers.
The miner has decided to focus first on the chemicals plant option. “For selling thermal coal, we are according priority to the chemicals project as there is ready local demand for nitrogenous fertiliser,” reported Jha. ICVL hopes to be able to sell 500 000 t/y of coal to such a chemicals plant. Its only involvement in any ammonium nitrate operation would be to provide a long-term supply of coal. Having received the two EoIs for the chemicals proposal, the miner is now seeking firm offers to develop the project.
Regarding the proposal for a coal-fired power station at Benga, the problem is the lack of transmission infrastructure in Mozambique. This could deter possible investors as it complicates the task of establishing and supplying customers for the power. Consequently, the miner has decided to handle this project separately. Meanwhile, ICVL is discussing the situation with the Mozambique authorities. Again, the miner would not be involved in any project other than as a long-term coal supplier.
Benga currently has an annual production capacity of 5.2-million tons, mostly coking or metallurgical coal. The thermal coal from the mine has a gross calorific value of 5 500 kcal/kg. Because of the lack of customers for the thermal coal, ICVL now has a substantial stockpile of the material at the mine and the company has been forced to restrict its production.
State-owned ICVL bought 65% of the Benga coal operation and 100% of the Zambeze and Tete East coal projects from Rio Tinto (reportedly for $50-million) in August last year. The remaining 35% of Benga is held by Indian private-sector group Tata Steel. However, in February, Tata Steel announced that it would make no further investments in the Benga operation and that it was planning to sell its shareholding in the mine.
Jha has reported that Tata has not yet taken any of its 35% share of Benga’s production. Tata’s share seems to be composed entirely of metallurgical coal. “We are in talks with Tata Steel for future shipments,” he said. As a result, only 35% of Benga’s production to date – representing ICVL’s share of the metallurgical coal production – has been exported. These shipments have gone to the Steel Authority of India Limited (SAIL) and to Rashtriya Ispat Nigam Limited (RINL – a steel company)
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 was set up as a partnership between SAIL, Coal of India Limited, RINL, the National Mineral Development Corporation and NTPC (India’s largest power producer). However, Coal India last month announced that its board had directed the company to withdraw from ICVL, reportedly because it regarded ICVL as a financial burden that did not bring in sufficient benefits.