Coal-fired power project in Mozambique gets its wings

A new joint venture between two energy development companies may result in the potential development of a coal-fired power station in Mozambique.

This follows the signing of a joint venture (JV) agreement between Kibo Mining, the multi-asset Africa focused energy and resource company, and Mozambique energy company Termoeléctrica de Benga S.A. (Termoeléctrica) to form the Benga Power JV.

The JV agreement will allow both parties to participate in the further assessment and potential development of the Benga Independent Power Project (BIPP), including the right to construct and operate a 150-300 MW coal fired power station.

Kibo and Termoeléctrica shall hold initial participation interests in the unincorporated joint venture of 65% and 35% respectively.

The Benga Power JV is another step in advancing Kibo’s strategy to position the company as a leading regional energy player.

Subject to the successful outcomes of further and more detailed studies on the BIPP, Kibo Mining envisages being able to develop the BIPP in an expedited manner alongside its Mbeya Coal to Power project (MCPP) in Tanzania and the recently acquired Mabesekwa Coal Independent Power (Mabesekwa) project in Botswana.

The Benga Power JV will utilise Kibo’s experience in the  advancement and development of power projects in the East African region and its strategic relationships with international development partners such as Sepco III and General Electric.

As the BIPP has similarities with the MCPP and Mabesekwa, it is envisaged that considerable benefits could be realised in any potential power station development, including economies of scale in equipment, execution and project finance.

Moatize mine

The Moatize mine in Mozambique is a metallurgical coal mine being developed by Vale (formerly known as CVRD - Companhia Vale do Rio Doce)

The Moatize mine was officially inaugurated in May 2011, and has an estimated life span of 35 years. In the first phase of the project the company plans to mine 11-million tons of coal a year, of which 8.5-million tons will be metallurgical coal and 2.5-million tons thermal coal.^[1] It was announced in November 2011 that Vale was going to spend $6 billion to expand the Moatize mine in the second half of 2014. The investment is aimed at increasing production from 11 million tonnes to 22 million tonnes per year.^[2]

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Contents

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• 1 Project details
  • 1.1 Proposed coal plant
• 2 May 2011: Coal production begins
• 3 August 2011: Coal reaches Beira port
• 4 Vale to spend $4.4 billion to build terminal at Nacala port and rail line; Japan also studies terminal funding=
• 5 Possible collaboration with South Korea
• 6 Protests
• 7 Articles and resources
  • 7.1 References
  • 7.2 Related SourceWatch articles
  • 7.3 External resources
  • 7.4 External articles

Project details

Vale won the tender for exploration rights over the Moatize deposit in November 2004.^[3]

On its website Vale states that the mine is planned to "produce 11 Mtpa (million tons per annum) of coal per year for the next 35 years – 8.5 Mtpa of metallurgical coal (hard coking coal) and 2.5 Mtpa of thermal coal. Production is due to begin in 2011."^[4]

The mine’s output will be transported Sena railway to the port of Biera. The company states that the coal export terminal "will be built under a concession from the Mozambican government. One of the largest coal handling and preparation plants (CHPPs) in the world is being built, with the capacity to process 26 Mtpa of coal."^[4]

In its 2009 annual report, Vale states that it has 1,087 million tonnes of coal resources (both proven and probable) across all its mines and projects. However, of that total, 954 million are in the Moatize mine. The company states that the projected depletion date of the project is 2046.^[5]

Moatize phase II is scheduled for 2015, and Vale has said it will increase production at the mine to 22 million metric tons annually, including five million tons of thermal coal.^[6]

In January 2014 Mitsui of Japan said it had agreed to pay nearly US$450 million for a 15 per cent stake in Vale’s Moatize mine, and invest a further US$188 million to fund the mine's expansion. Mitsui also agreed to pay US$313 million for a 50 per cent stake in Vale’s subsidiary that has been promoting the multi-billion dollar Nacala port and rail project.^[7]

Proposed coal plant

The Vale Tete Power Station is a proposed 600 megawatt (MW) coal-fired power station by Vale for the Tete province of Mozambique. Construction was planned to begin in 2013, but the plant was not approved until 2014. Vale said the plant will put part of the Moatize mine’s thermal coal reserves to use, generating electricity that will be used for the power grid centered on the Cahora Bassa hydroelectric power plant, also in the Tete province.^[8]

May 2011: Coal production begins

In May 2011 it was announced that Brazilian company Vale began coal production at an open cast mine in Moatize, Mozambique. Mozambique's President Armando Guebuza and Vale Chairman Roger Agnell in early May 2011 detonated the first charge of explosives initiating coal production. President Guebuza declared that the ceremony was the confirmation that "what was previously a dream is now a majestic undertaking in which natural resources are driving the development of Mozambican human resources". Vale invested about US $2.0 billion in Mozambique as of May 2011, and the company stated that it intended to invest a further US $4.0 billion over the next five years. Vale expected exports of coal to begin within by July 2011, despite delays in rebuilding the Sena railway line, which links Moatize to the port of Beira. Currently, Vale-Mozambique employs approximately 8,000 workers, more than 85 percent of whom said to be Mozambican. "In the second phase of the project, which is already being developed, we will employ 15,000 workers," said a company spokesman.^[9]

August 2011: Coal reaches Beira port

Brazilian mining titan Vale reported in August 2011 that it delivered its first coal by train from its Moatize mine project to the Beira port and expects to export the coal in August 2011. The first train carried 2,200 metric tons of coal from Vale’s Moatize coal mine.

Vale is the first of the major mining companies to start producing thermal and metallurgical coal from the Tete basin. The Moatize project will be able to produce up to 11 million tons of coal, 8.5 million tons of which will be metallurgical coal and 2.5 million tons thermal coal.^[10]

Vale to spend $4.4 billion to build terminal at Nacala port and rail line; Japan also studies terminal funding=

In July 2011 it was announced that Brazilian based Vale began studies on building a coal terminal at Nacala port in northern Mozambique. The project is expected to cost about $1.5 billion.^[11] In 2012, Vale, said that it was planning to spend $4.4 billion to build the terminal and the 912 km railway line to connect the port with its Moatize mine. Separately, Japan has been conducting a feasibility study on improving the capacity and operation of the port. However, as of February 2012 Japan remained undecided on whether to fund the Nacala project.^[12]

Possible collaboration with South Korea

On January 30, 2011, South Korean steel group Posco said it had agreed with Brazilian group Vale to the joint development of a coal mine in the in Tete province of Mozambique. In a statement, the group said that the coal mine could produce 11 million tons of coal per year, to be used for generating electricity.^[13] While the news reports didn't specifically mention the mine name, the only mine that Vale is developing is Moatize mine. In a later story Reuters reported that POSCO denied the earlier report and said that "we don't have any plan to develop a coal mine in Mozambique with Vale and our earlier statement had factually wrong information".^[14]

Protests

In April 2013 former landowners displaced by the mining project blocked the entrance to the mine. The BBC reported that approximately 5,000 landowners had been displaced by the mine. After more than a year of negotiations with the company and five years after they were displaced in 2008 for the mine, frustrated landowners blocked the entrance to the mine. While the company argued that it had paid those displaced approximately $2,000 per person, the landowners argued that they should receive more because of the loss of the community's brick-making industry. "When Vale came to Mozambique the government told us, you will get very rich. That is why we want the company to pay us what it owes us," one of the protesters, Maxwell April, told AFP. ^[15]

Mitsui Invests in Vale’s Coal Infrastructure Project in Mozambique

Mitsui Invests in Vale’s Coal Infrastructure Project in Mozambique

 

 Published: Wednesday, 14 January 2015 16:30

 Written by E&MJ News

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Mitsui & Co., Ltd. has made a significant investment with Vale S.A. regarding the Moatize mine and the associated rail and port infrastructure project, referred to as the Nacala Corridor, in Mozambique. Mitsui purchased a 15% interest in the Moatize mine for $450 million, and a 50% interest in Vale’s investment in Nacala Corridor for $313 million. The amount for the mine will be adjusted based on the future actual performance results of the Moatize project, so the final payment amounts could vary based on the conditions of the contracts.

The Moatize mine is currently billed as one of the largest, cost-competitive operating coal mines as it has a huge coal reserve amounting to 690 million metric tons of metallurgical and thermal grade coal, and the seams are shallow, which enables a large-scale open-cut operation. Vale began production in August, 2011, and now exports coal via Sena railway from the Port of Beira, which is about 600 km south of the mine. The annual production in 2013 was 3.8 million tons. Vale plans to expand the annual production capacity of the mine to 22 million tons in 2016. The expected expansion cost is approximately $2.1 billion, part of which Vale has already paid, and Mitsui’s future payment for the expansion cost on a pro rata basis is expected to be $190 million.

The anticipated mine expansion would overrun the Sena rail and port capacity. So, the plan is to construct the Nacala Corridor infrastructure, to ship coal from the Port of Nacala, 912 km east of the mine. The pro-ject would include the upgrade of the 682 km existing rail line, which runs across Mozambique and Malawi, and the construction of the new 230 km rail line and new construction of a coal terminal in the Port of Nacala and development of general commodities terminals. The facility’s export capacity is planned to increase gradually to 22 million tons. The total construction cost is expected to be approximately $4.4 billion.

Mozambique coal - Railway connections

Mozambique coal - Railway connections

As the mining industry demands more from the country’s infrastructure, the government must find new ways to expand its limited capacity.

It’s no secret that the rail and port infrastructure in Mozambique is unable to cope with the current demands of the population, let alone the mining companies. Industry leaders recently stated that it would take a total investment of $20 billion to revive and rejuvenate the country’s railways and port infrastructure. 

WHICH WAY?

One of the main strains on the current infrastructure is the fact that Mozambique is trying to export huge quantities of coal on a signal railway, the Sena Line. It is the only link between the remote coalfields of Tete and the ports on the east coast. Therefore, if something happens along the way, all exports stop, as happened in February 2013 when a section of the line was flooded, and Brazil’s Vale had to invoke the force majeure clause in its contract for two weeks as shipments shut down. The Sena line is under serious strain from the coal companies and the population of the country, and was only able to move 3 million tons of coal in 2012, less than half of what was projected. In 2009, the British-Australian company Rio Tinto and other mining companies were actively seeking to use the Zambezi River to transport coal for two reasons: first, it is almost 300 kilometers shorter by river than it is by rail, and second that it is almost an exclusive form of transport for the coal industry, unlike the railways. 

One of the major problems for Mozambique is that the lack of rail infrastructure in the first place, it cannot allow for an exclusive rail link for the coal industry, as there is no alternative for the population. In the end, the government would not allow the Zambezi River to become a transport link for the coal industry because of the environmental impact it could have on the surrounding area.

THE VISION

The government has a 2020 vision of exporting 120 million tons of coal. To do this, it needs to improve its links, and the most cost-effective way for the government  to do this would be via private investment, which has already begun. In February 2013, Mozambique Ports and Railways (CFM) signed an agreement with Vale to upgrade the Nacala Corridor, which would reach from the border of Malawi all the way to a new coal terminal at Nacala-a-Velha. The project would also consist of upgrading a line in Malawi from the border with Mozambique to Nkaya. As well as this, Vale will also construct a new line from Nkaya to Mozambique’s western border, where it will connect with Moatize coalfield line. The whole project is expected to cost around $4.4 billion. The government has also launched a tender for a $3 billion project in Tete. There were 21 bidders in the beginning, but as of April 2013 there were six remaining, with Rio Tinto the frontrunner. The tender is for a 525-kilometer rail link from Tete to Macuse in Zambézia Province, as well as building a new port with a capacity of 25 million tons of coal per year. The port will also be built with the potential to double capacity if the need arises. The government hopes that this tender will be completed in the next few years and the Minister of Transport and Communications, Paulo Francisco Zucula, hopes that this will increase the total export capacity to 30 million tons per year. However, since the mining companies are not allowed an exclusive line, it will also need to accommodate passenger trains for the local population.

The Port of Beira in the north, close to Tete, and the ports of Maputo and Matola in the south are the main exports hubs of Mozambique at the moment. The southern ports have a current export capacity of 15 million tons of coal per year. The ports are owned by Grindrod and Maputo Port Development Company (MPDC), while MPDC is a joint venture between the Mozambique Railway Company, Grindrod, and DP World. The ports are the most southern in Mozambique and are in need of upgrading, as demand is extremely high. The Matola Port is more specialized in coal and bulk transport, while Maputo generally handles cargo and other exports. Grindrod and MPDC have pledged to invest $1.7 billion over the next five years to meet the growing demand. The investment plans to increase the capacity up to 50 million tons per year by 2020. The first installment of $355 million has been approved for 2013 and 2014 and will increase Matola Port’s capacity to 7.2 million tons by 2014. 

THE WAITING GAME

Mozambique’s underdeveloped infrastructure may help the country in the short term. The coking coal market is oversupplied at the moment and prices are low due to lower demand from steel mills because of production issues in China. Mozambique’s coal is of a high quality, and mining companies are hoping by the time the new capacities start to come online, prices will have moved back up to the highs of 2011 and market supply will have tightened back up again.

Investments are coming into Mozambique, but companies remain skeptical as to whether infrastructure can meet export targets. Either way, infrastructure all over the country is getting a much-needed revamp and capacity will increase over the next few years. 

Mozambique: Nacala Integrated Logistics Corridor Launched

Maputo — The first trainloads of coal along a railway from the Moatize coal basin through Malawi should reach the new port of Nacala-a-Velha in northern Mozambique in September.

The government has signed a concession on the new port and on coal traffic along the railway with the Integrated Nacala Logistics Corridor (CLN), a consortium that is 80 per cent owned by the Brazilian mining giant Vale, and 20 per cent by Mozambique's publicly owned port and rail company, CFM.

At a Maputo ceremony launching CLN, consortium officials said the entire project is costing 4.4 billion US dollars. The coal terminal at Nacala-a-Velha, built on the opposite side of Nacala Bay from the existing port of Nacala, will be able to export 18 million tones of coal a year.

The railway runs for over 900 kilometres, and CLN's projections are for about 20 coal trains a day. This will require a fleet of 100 locomotives and 2,700 wagons. 12 ships a month are expected to call at the coal terminal.

Vale opted for a new port and railway when it became clear that the existing Sena line, from Moatize to the port of Beira, could not possibly cope with the forecast coal exports. Even with planned upgrading, the capacity of the Sena line is no more than 12 million tonnes a year. But within the next few years the potential coal exports from the Moatize basin could reach 100 million tonnes a year.

Transport Minister Gabriel Muthisse noted that the existing railway from Malawi to Nacala is only handling around two million tonnes of cargo a year. With the new port at Nacala-a-Velha and the CLN investments in the railway, there will be a dramatic increase, and Muthisse believed that in the near future the line will be carrying 24 million tonnes of coal and cargo.

A different consortium, the Northern Development Corridor (CDN) already holds the concession on the railway for general traffic, and Muthisse pointed out that the two consortia will have to work together.

He warned that “the markets are very demanding and we are not the only suppliers. The coal chain of value goes from the mine right up to the final destination. It is no good extracting the coal efficiently at the mine, if there is no efficiency along the railway and at the port”.

Any lack of transport efficiency “and Moatize coal will lose its competitiveness”, Muthisse said. “Not a single kilo of coal should remain heaped up at Moatize. This depends on the operations of the railway, the port and the shipping companies”.

The same held true for copper from Zambia, or from the Democratic Republic of Congo. That was cargo that could use Nacala - but only if the transport system was efficient and competitive. Otherwise, warned Muthisse, exporters of the copper might prefer to use Durban, Dar es Salaam, or even Mombasa.

Vale officials told AIM that work on the railway will be complete by September. It has involved a new rail link to connect Moatize to the Malawian rail system, and major upgrading to the Malawian part of the line. The railway enters Mozambique again at Entre-Lagos, and the 77 kilometre stretch between Entre-Lagos and the city of Cuamba is being effectively rebuilt. There is also an entirely new stretch of line branching off the existing rail corridor and reaching the Nacala-a-Velha coal terminal.

Mozambique Coal Images

Mozambique Coal - Moatize

Wednesday, September 09, 2009

Moatize coal mine - helping put Mozambique back on the map

Reported by Jaycee Krüger in South Africa

Brazilian resource giant Vale is pushing forward on development of the $1.3bn Moatize coal mine in Mozambique and expects to start production of coking coal for export late 2011. Vale GM Finance Fabio Bechara said at the Coaltrans South Africa conference being held in Sandton, South Africa that the initial box cut for the open cast mine would start in the second quarter of 2011.

Initial earthworks and civil construction on the coal preparation plant are underway following completion of the detailed engineering studies which took place in the year to end-June. Some 3,500 workers were currently on site at the project while the relocation and resettlement of some 5,000 local people affected by the mine development was also underway.

The port of Beira will handle all the phase one exports but that the port of Nacala would be required to handle export volumes above those levels. The rehabilitated line will be able to transport between 6mt and 8mt of coal annually which is clearly not enough for Vale's long term requirements as well as other potential coal producers in the Moatize region.

The 575km Sena/Beira railroad is being upgraded to handle the anticipated initial export levels. The rehabilitation of the Sena/Beira line had 150kms to go as of end-June and Bechara estimated it would be completed by the first quarter of 2010.

Access to Nacala, 1000km away is complicated because the railway line will have to cross neighbouring Malawi to reach the port situated in northern Mozambique. Bechara said the Nacala corridor is a very important solution for the future of the Moatize coalfield where they are not the only company planning to develop coal mines. The Sena/Beira line has limited capacity and we will need Nacala in about 5 years time.

Bechara said plans to build a coal-fired power station in the Moatize region are constrained by the availability of transmission lines to get the power to consumers elsewhere in Southern Africa. "We have the capacity to produce far more than the 2.5mt/year of coal needed by a local power station generating 600MW - all the transmission infrastructure can handle at present, without costly expansions. Export remains an attractive solution for now.

For more information visit: http://www.vale.com/vale_us/cgi/cgilua.exe/sys/start.htm?infoid=2565&sid=610  

Mozambique: Coal Production Starts at Moatize

9 May 2011

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Maputo — Mozambican President Armando Guebuza and the chairperson of the Brazilian mining giant Vale, Roger Agnelli, on Sunday detonated the first charge of explosives initiating coal production at Vale's open cast mine in Moatize, in the western Mozambican province of Tete.

two men together pressed a button installed in the giant tent where the official ceremony to launch coal production was held. The explosion sent an enormous black cloud of coal dust into the atmosphere, as the crowd burst into applause.

It has long been known that there are coal reserves in Moatize, but under Portuguese colonial rule, and in the initial post-independence period, they were barely scratched in small underground mines. One such mine, now run by the British company Beacon Hill, continues to produce - but at the very low level of 30,000 tonnes a year. Vale is talking of millions of tonnes a year.

The Vale licence was granted in 2004, and even then Vale officials were speaking of Moatize as one of the last great unexploited coal basins in the world. Construction of the mine began on 27 March 2009, when Guebuza and Agnelli laid the first stone.

Guebuza declared that the Sunday ceremony was the confirmation that a dream has now become a reality. "What was previously a dream is now a majestic undertaking in which natural resources are driving the development of Mozambican human resources", he said.

He regarded the start of coal production at the Vale mine as a further victory in the struggle waged by Mozambique against poverty.

Guebuza stressed Mozambique's high potential in natural resources such as coal, natural gas, gold, tantalite, titanium-bearing heavy sands, and phosphates, among others, which are a pole of attraction for national and foreign direct investment. To keep the investment flowing, he pledged that the government will continue to introduce reforms to improve the Mozambican business environment.

Guebuza called on Mozambicans to exploit all the potential of the country's coal reserves in order to generate, in a sustainable and structured manner, more employment, income and development in Moatize district, Tete province, and the country as a whole.

Agnelli announced that so far Vale has invested about two billion US dollars in Mozambique, and intends to invest a further four billion dollars in the next five years.

As for the export of coal, Agnelli expected it to begin within the next two months, despite the delays in rebuilding the Sena railway line, linking Moatize to the port of Beira.

Currently, Vale-Mozambique employs about 8,000 workers, more than 85 per cent of whom are Mozambican. "In the second phase of the project, which is already being developed, we shall reach 15,000 workers", said Agnelli.

He stressed that this relatively large number of waged workers would change the face of Tete, since it would create a large demand for other services, including public transport and supermarkets.

As for new investments in the coming years, Agnelli stressed the plan to build a new railway from Moatize to the northern Mozambican port of Nacala, across southern Malawi, and the improvements to the port so that it can eventually handle 22 million tonnes of coal a year.

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But in the initial phase, the mine will have the nominal capacity to produce 11 million tonnes of coking and thermal coal a year, which will be taken down the 600 kilometres of the Sena line to the new coal terminal under construction at Beira.

Agnelli was confident that, even in the first phase, coal exports will reach between 2.5 and three billion dollars a year. As from next year Mozambique should have a positive balance of payments, with the value of the country's exports surpassing that of its imports.

Vale has also invested over 100 million dollars in projects of corporate social responsibility, including the rehabilitation of Tete Provincial Hospital, the building of schools and health centres, and the development of local agriculture.