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At the crossroads

World Coal,

Although reports from the developers of Mozambique’s two major coal projects state that they will start exporting coal during Q1 2011, analysts are concerned that plans to link the new mines to the chosen port of Beira are neither totally viable, nor sufficiently advanced for them to meet that deadline.

Benga and Zambezi projects
The projects are by Australian-based Riverside Mining, in joint-venture with India’s Tata Corp., and Brazilian international mining group Vale. Both are in the initial stages of developing mines in the Moatize area of the Tete province, Mozambique.

Riversdale’s Benga coal resource now totals 4 billion t (measured 314 million, indicated 720 million, inferred 2.9 billion). This includes an initial coal reserve of 273 million t (proven 181 million, probable 92 million). Initial ROM production should be 5.3 million tpa to produce 1.7 million t of high quality hard coking coal and 300,000 t of export thermal coal, with the company forecasting the first shipments during Q1 2011. Two further phases are planned. By 2014, upgrading of the preparation plant should increase ROM production to 10.6 million tpa with a final product of 3.3 million t of hard coking coal and 2 million t of export thermal coal. A final stage with as yet no timeline is anticipated to increase production to approximately 20 million tpa ROM.

The company’s 100% owned Zambeze project is contiguous to Benga and is likely to be significantly larger.  The resource is indicated at 1.7 billion t. Production is expected to be export coking coal, with a secondary thermal coal product of high energy export coal for which the company would target the Indian market.

There are also plans to build a mine-mouth 500 MW coal-fired power plant in partnership with Elgas SARL, which would be commissioned by April 2013. As phase two of the mine comes onstream, the plant could be scaled up to 2000 MW. The power generated is expected to help meet demand in Mozambique and southern Africa, as well as supply the mine. Riversdale is in discussions with South African generator Eskom.

Moatize project
Vale’s Moatize development is a US$ 1.3 billion mine and energy project to exploit estimated reserves of 838 million t of coal. The latest estimates for coking coal production have been increased to 12.7 million tpa during stage one, which is expected to come onstream during Q1 2011. It is expected that 2.4 million tpa of thermal coal will be exported and a further 3 million tpa eventually used to fire the 600 MW mine-mouth power plant. Approximately 8.5 million tpa of met coal will also be exported.

In its latest update, Vale said that the export coal will be transported by the 600 km Sena railway to a maritime coal terminal at the port of Beira. Riversdale said that access through berth eight at the port is being negotiated with the concessionaire, but plans could go awry over these rail and port negotiations.

Logistical headaches
The Sena railway is currently being refurbished and was expected to be ready to carry coal traffic during Q1 2010, but there seem to be delays in deciding what rolling stock will be required – or supplied – to enable the coal to be unloaded at Beira. An industry analyst said in November that the preparations did not seem to have been as thorough as they might have been: 'A completion date of early 2010 in respect of being able to unload and load coal at Beira seems highly unlikely,' he said.

The analyst was also sceptical of a tender to build a 20 million tpa terminal at Beira to replace the existing one and also increase the draught from the present 4.8 m to at least 9 m.

Barging down the Zambezi
The idea of barging coal 550 km down the Zambezi was first suggested by Riversdale. The barge route would start on the Zambezi, but as it approaches the river mouth it would be diverted along a tributary to Chinde. In its latest annual report, Riversdale says it has found no physical impediments to barging, although some dredging may be required on certain sections of the river.

Vale has not commented on the conditions at Beira, but has said that, given the perceived limitations of the Sena railway, the development of a second stage at Moatize will depend on different logistics to move its coal, possibly through Nacala in norther Mozambique.

Shipping from Nacala
Nacala is a deep-water port. It has a 20 m draught and capesize vessels can berth easily. Shipments could reach 16 million tpa with Vale putting in 12 million t and Riversdale adding 4 million t. An existing 750 km narrow gauge, 18 t axle weight limit railway line runs from the port into Malawi, taking a general direction closer to Moatize. The line is operating, but would need refurbishment and linking to Moatize. Funding for this is in the pipeline from the Dutch and Danish Governments.

Although Lenahan says that Riverside is pursuing the Sena railway to Beira as its initial transport option, he admits Nacala is going to be the long-term option to move large volumes of coal. However, given all the uncertainties, he admits, 'I wouldn’t be at all surprised if all of the options are used to some extent.'

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