Mozambique: Guebuza in discussions with Rio Tinto

The Chief Executive Office of the energy division of the Anglo-Australian mining company Rio Tinto, Doug Ritchie, on Monday assured Mozambican President Armando Guebuza that his company possesses the financial muscle and the technical capacity to run successfully its coal mining projects in the western Mozambican province of Tete.

Guebuza was visiting an iron ore mine run by Rio Tinto in Karratha, about 1,300 kilometres from the Australian city of Perth. Here, Guebuza witnessed how ore trains are unloaded and how the ore is carried by conveyor belt to storage areas, among other operations

Rio Tinto is the third largest mining company in the world (after BHP-Billiton, and Vale of Brazil). It recently took over another Australian company, Riversdale, and so acquired Riversdale’s coal interests in the Moatize basin in Tete.

Rio Tinto had been negotiating to purchase Riversdale since December. In April, Rio Tinto took a majority holding in Riversdale, but continued to buy out other shareholders. The last major shareholder in Riversdale to sell to Rio Tinto was Tata Steel of India. Tata sold its entire 26.27 per cent stake in Riversdale in June for 1.13 billion US dollars.

But it is a subsidiary, Riversdale Energy (Mauritius) Ltd, which holds the coal assets in Mozambique, through the company Riversdale Mozambique Limitada. Tata still owns 35 per cent of Riversdale Energy, and has declared a desire to work with Rio Tinto in developing the open cast coal mine at Benga, on the north bank of the Zambezi river.

“Your visit is very important for us”, Ritchie told Guebuza, “since Rio Tinto wants to build a large, profitable and world class coal company in Mozambique. Following our acquisition of the Riversdale assets, our ambition is to develop them to maximize their economic value”.

“We are seeking the collaboration of the Mozambican government”, he added, “because short development timetables will be fundamental for maximising value”.

For his part, the managing director of Rio Tinto Coal Mozambique, Eric Finlayson, said that the enormous coal potential could make the country one of the largest coal producers in the world. But for that to happen, huge investment was needed in railways, ports, roads and river transport.

Currently coal exports from Moatize travel to the port of Beira along the 575 kilometre long Sena railway. Rio Tinto’s main competitor, Vale, started exports from its Moatize mine in September.

But neither the Sena line nor the coal terminal at Beira have adequate capacity to handle all the future coal exports from Moatize. Currently the Sena line’s maximum capacity is six million tonnes a year. Even if further investment in the line doubles capacity to 12 million tonnes, that is way below the predicted output of the Vale and Riversdale/Rio Tinto mines.

Vale is expecting to eventually produce 25 million tonnes a year, whilst the Riversdale forecasts were that Benga will produce 10 million tonnes of coal a year, and a second Riversdale/Rio Tinto mine in the adjacent Zambeze concession area will, in late 2014, begin producing up to 25 million tonnes a year. A third Riversdale area, Tete East, could contribute a further 10 million tonnes.

Several other companies are also exploring the Moatize basin, with every prospect of producing and exporting large amounts of coal. Alternative transport routes are thus required.

Vale favours a new railway, to be built across southern Malawi, which will link up with Mozambique’s northern line to the deep water port of Nacala. The advantage of Nacala is that it can be used by ships of any size and needs no dredging.

Rio Tinto has inherited Riversdale’s plan to take the coal on barges down the Zambezi, and to transship the coal onto ocean-going vessels near the mouth of the river. This would be a distance of only 500 kilometres (compared with 900 kilometres for the proposed line to Nacala). Finlayson argues that using the Zambezi is the most viable alternative to the Sena line.

“Coal resources of billions of tonnes are being developed by Rio Tinto”, he told Guebuza. “The railway from Moatize to Beira is the only operational infrastructure for coal exports. To achieve significant levels of production, massive investment in infrastructure is required”.

The Rio Tinto estimate is that, by 2035, the revenue from coal exports from Tete could be between 15 and 17 billion US dollars a year

Finlayson expected Rio Tinto’s Tete operations to be employing 3,000 people by 2016, a number that would rise as the mining projects expanded.

The company, he added, faced challenges of implementing world level standards in matters of health and safety, construction, environmental matters and human resources. Rio Tinto, he stressed, “wants to develop its coal projects in the Tete Basin as quickly and as safely as possible”.

Post published in: Africa News

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