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Mozambique to be major mining growth story

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World Coal,

Mozambique will be a major growth story in the global mining sector as investment in the country's sizeable coal reserves fosters rapid growth in output, according to a new report from Business Monitor International (BMI). The market research company expects the value of the country’s mining sector to grow from US$ 0.4 billion in 2013 to US$ 1.2 billion in 2018, representing an increase from 2.9% of GDP to 4.2%.

“Mozambique's nascent coal sector is set to take off in the next five years,” BMI said in a press release. “Almost all of the coal produced will be exported and thus Mozambique has the potential to become one of the largest global coking coal exporters, with India and China the main destinations.”

However, the report also highlights concerns surrounding the country’s infrastructure and its ability to cope with the projected increase in mining production, as well as current weakness in metallurgical coal prices, which will threaten mining companies’ profitability.

Rio Tinto recently sold its coal projects in the country for US$50 million to a consortium of Indian buyers, with infrastructure constraints as the major factor behind the decision. The mining giant had originally bought the assets for US$3.7 billion in 2011.

The Mozambique government’s recent announcement indicating its intention to increase taxation on the mining industry may also cause concern among investors, although overall BMI believes the country will remain a “broadly attractive business environment.” It will also benefit from increasingly strict regulation and resource nationalism in neighbouring countries, particularly Zimbabwe.

“Mozambique continues to pursue its goals of opening up its mining sector to greater foreign investment and boosting its competitiveness as a mining destination,” BMI concludes.

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