Coal India plans to re-enter Mozambique

KOLKATA (miningweekly.com) – Less than a month after formalising its exit from developing coal blocks in the Tete province of Mozambique, Coal India Limited (CIL) is planning to re-enter the African country in search of a new project.

According to a CIL official, the Indian miner will approach the Mozambique government for the allotment of a new coal block, but it will seek an assurance on coal grades, after the previous coal block was found to have negligible coal content. CIL is preferring a coking coal block.

Last month, the CIL board formally approved surrendering prospecting licence numbers 345L and 3451L to the government of Mozambique.

In 2009, CIL subsidiary Coal India Africana Limitada was granted a six-year exploratory licence for A1 and A2 blocks in Tete and after spending an estimated $80-million on exploration, the Indian miner claimed that there was no coal in the block and hence no commercially viable mining operations could be pursued.

However, in its re-entry bid, it has been decided that application for a new coal block will be sweetened to woo the Mozambique government into allotting a more viable high-grade coal block including coking coal, the current focus in the foreign acquisitions of CIL.

Although the details of the “deal sweetener” are yet to be finalised, the indication is that the bid for a coal block will be expanded to include the development of allied infrastructure near the allotted block, including a railway link to evacuate coal and potentially a port with coal handing terminals.

While no official confirmation was available, indications are that CIL will bid for a new coal block in Mozambique as a consortium and the miner will approach partners such as IRCON, the subsidiary of government owned Indian Railways, specialising in consultation on and construction of railway links, roads and highways, and government or private sector port operators, to be part of the consortium.

CIL’s persistent interest in Mozambique, despite the earlier aborted project, stems from the Coal Ministry’s view that India’s domestic coking coal production can not be ramped up in the short term and can at best be pushed up to 71-million tons a year by 2020 against 54-million tons a year at present.

According to the Steel Ministry, coal imports are forecast to touch 50-million tons in the current financial year, from 43-million tons shipped during 2015/16. Coal imports are expected to rise to 180-million tons by 2025, if India is to achieve total steel production of 300-million tons a year.

Hence, despite facing a glut of thermal grade coal at home, CIL will have to persist with efforts to secure high-grade coal assets overseas. Last month, CIL approved the signing of an agreement with South Africa government-owned African Exploration Mining and Finance Corporation aiming to acquire coal mines in that country.

With the same strategy, CIL earlier this week announced that Coal Videsh, the overseas arm of CIL, was in touch with an Indonesian government-owned coal miner seeking to acquire coal assets in that country.