The major challenge facing coal mining companies in Mozambique is not the capital to finance actual mining activities, but figuring out how to get the minerals to the ports.
During a recent conference in the capital Maputo, Rajat Kohli, Standard Bank’s global head of mining and metals said that Mozambique’s Moatize coal basin, situated in the remote Tete Province, is the world’s last substantial untapped coal reserve.
Mining companies operating in the Moatize basin include Australia’s Riversdale (owned by Rio Tinto) as well as Brazil’s Vale. According to Standard Bank, Vale has already commenced with coal production and exports are expected to start in September this year.
Kohli told the conference that Moatize is potentially the largest reserve of coking coal in the world. “About 100 million tonnes per annum of coal could be produced within the next five years, and that figure could even go further,” he noted.
Despite the current excitement about Mozambique’s coal deposits, there are significant challenges related to moving the coal. “As mining in the basin expands, coal output will exceed railway capacity, even with further upgrading. Miners want to get the product out quickly and the Mozambican government wants development,” Kohli explained.
Standard Bank has begun looking at opportunities and structures for financing the development of infrastructure required to mine the Moatize coal basin. According to Kohli, “finalising the financing package and structure for the required roads, rail and ports remains the primary opportunity.”
“Collaboration is needed between miners and the Mozambican government on an appropriate model. One option is for miners to part-own the infrastructure, but this raises the key question of how much capacity will the miners be willing to allocate to other commodities and goods,” he added.