Mozambique coal boom caught UN off guard

[miningmx.com] – THE emergence of Mozambique’s Tete province as the new epicentre of coking coal – the material used in steelmaking – had caught the United Nations by surprise, a UN official said this week.

“Until fairly recently, the scale of impact of coal mining, particularly in the province of Tete, was either not known, or under-estimated by the … development agencies,” said Jaime Comiche, head of operations at Unido (United Nations Industrial Development Organisation).

As a result, he said Mozambique’s local economy was not appropriately linked in to the massive investment the region has attracted since 2009.

Vale, the Brazilian iron ore and coal producer, invested $1.3bn in an 11 million tonne/year coal mine in 2009 and said it would place $6bn more to double production and build a rail route from its Moatize mine to Nacala, a port in northern Mozambique.
UK-listed miner, Rio Tinto, bought the Benga coal mine, also in the Moatize district of Tete province, for just under $4bn in 2010.

“The local development agenda is not yet attached to the economics of a single commodity or source of revenues,” said Comiche who was speaking at the Coaltrans Mozambique conference in Maputo.

“Structures to capture and maximise the benefits of developments in the coal industry are not in place,” he added.

The introduction of Vale and Rio Tinto has led to subsequent investments by Eurasian Natural Resources Company and, most recently, Anglo American which pumped $555m for a 58.9% stake in Minas de Revuboe, a proposed 10Mtpa coking coal mine.

However, Comiche’s comments suggest that more attention will be directed towards how mining investments benefit the local economy. Mozambique’s economy is growing at 7% to 8%, and with a $60bn windfall expected from investment in the country’s Rovuma offshore gasfields, it is expected to continue to expand at a fair clip.

Eduardo Alexandre, national director of mines in Mozambique, said at the conference that although infrastructure was growing, other challenges, such as the beneficiation of minerals, posed a problem for government.

About 57 licences had been issued for coal prospecting in Tete but “. infrastructure development, the building public institutions and beneficiation of the minerals,” he said.

Resettlement of Mozambican communities was another specific problem identified by Comiche. “Some critical mistakes created a bitter taste in the mouth,’ he said, indirectly referring to protests by 700 families in February who said a resettlement plan by Vale had left them with insufficient access to water, power, and too little land.

About 99% of Mozambique’s farming community is subsistence farming. As a result, they are very little negotiating power, said Comiche.

Speaking to the New York Times, Vale Mozambique’s country manager, Ricardo Saad, said the relocation problems were being handled. “There were some problems after the relocation. One of the things that we have to manage very carefully is expectations,’ Saad said.

Comiche, meanwhile, said it was up to the Mozambican government to ensure that local development flowed from the investment. “We are really just in listening mode. We compile the evidence and bring the reports. It is up to government to act upon it,” he said.