Brazil’s Vale opens $1,7bn coal mine in Mozambique

World’s largest mining company Vale won the mining concession in one of Africa’s poorest countries seven years ago

Monday09, 2011
Johannes Myburgh

BRAZILIAN mining giant Vale opened a new $1,7bn coal mine in Mozambique yesterday, tapping the southern African country’s thermal and coking coal reserves of about 23-billion tons.

Mozambican President Armando Guebuza and outgoing Vale CE Roger Agnelli attended the opening ceremony in Moatize, outside the city of Tete in northwest Mozambique, to mark the largest single investment in one of the poorest countries, according to a statement.

Vale plans to export 1-million tons of coal from the $1,7bn project this year and ramp up production to 11-million tons in a few years — and, local officials hope, boost Mozambique’s economic growth of 6,5%.

Mozambique’s coal reserves have lain relatively untapped since independence from Portugal in 1975. A civil war from 1977 to 1992 crippled its economy and decimated its infrastructure. Two decades later, Mozambique is welcoming foreign investors to its mineral wealth and licking its lips at the prospect of a boom. But concern remains about getting the product to market as infrastructure renovation lags behind.

In 2004, Vale became the first international mining giant to be granted a concession in Mozambique. At the peak of preparations, the company counted 6000 workers, mostly Mozambican.

Australian mining firm Riversdale, in a partnership with India’s Tata Steel, will also start operations later this year at a nearby coal mine, hoping to produce 6-million tons a year by 2016.

Mozambique signed a third large coal contract with India’s Jindal Steel and Power in February. The company hopes to produce 11-million tons a year when the mine opens next year.

But transport issues still loom large over the country’s plans for an export boom. Reconstruction of the 600km Sena railway line that connects the coal-rich Moatize district to the Indian Ocean port city of Beira is still not finished, forcing authorities to reconsider their contract with Indian consortium Ricon.

Though work is also unfinished on the coal terminal at the port, officials have sought to reassure that the mining giants will be able to get their product to market. "Exports will start in the second semester," Mozambique Central Railway Services head Candido Jone said.

"There are some problems, but it is still working."

Even when ready, the Sena line will be able to handle only 6-million tons of coal a year — with 4-million allocated to Vale and 2-million to Riversdale. Those caps are less than half of the companies’ respective export goals.

Vale is investing in another railway line, from Tete to the northern port of Nacala, the country’s only deep-water port. The company last month signed a deal with Malawi to build about 100km of the line across the country’s southern end, giving it a straight route to the sea.

Vale broke ground on the Moatize project in March 2009.

Exiting CE Mr Agnelli, whose departure was announced last month, has overseen the project since Vale won the concession seven years ago. This is expected to be his last trip to Moatize before handing the reins over to former company executive Murilo Ferreira on May 22. Sapa-AFP