China co signs $3 bln Tanzania coal, iron deal

Thu Sep 22, 2011 5:05am EDT

Related Topics

* Project touted as single-biggest investment in region

* China seeks more supplies of raw materials in Africa

By Fumbuka Ng'wanakilala

DAR ES SALAAM, Sept 22 (Reuters) - China's Sichuan Hongda Co. Ltd. has signed a $3 billion deal with Tanzania to mine coal and iron ore in the resource-rich east African country, local media said on Thursday.

The investment involves construction of the Mchuchuma integrated coal mine, a 600-megawatt (MW) thermal power station and the Liganga iron ore mine in southern Tanzania.

Dubbed the single-biggest investment deal in east Africa, Sichuan Hongda will own 80 percent of the joint venture project, with the remaining stake held by Tanzania's state-run National Development Corporation (NDC).

China has been increasing its footprint in Africa as it scrambles for oil and raw materials, bought in exchange for low-cost consumer goods.

NDC first announced the planned $3 billion investment by the Chinese firm in January.

"An article in the agreement provides ... that NDC could increase its shares to 49 percent after the Chinese company has recovered costs of investment," Tanzania's state-run newspaper Daily News quoted Industry and Trade Minister Cyril Chami as saying at the signing of the deal on Wednesday.

Tanzania passed a new mining law last year, paving the way for the state to own a stake in major mining projects.

China, the world's largest consumer of iron ore, has signed a number of deals in Africa to secure supplies of the resource.

NDC said early studies indicated that the Liganga area was rich in iron, vanadium and titanium minerals. Reserves are estimated to be between 200 and 1,200 million metric tonnes, with 45 million already proven through drilling.

The Mchuchuma deposits have more than 480 million tonnes of coal reserves, according to government estimates.

Sichuan Hongda and NDC have formed a joint venture company, Tanzania China International Mineral Resources (TCMR), to build the coal and iron ore mines.

Tanzania said Sichuan Hongda had already secured $600 million initial financing from Chinese banks to kick start the investment, with implementation of the projects expected to start within six months.

NDC said the Chinese firm won the bid after 48 international firms expressed interest in the projects.

China and Tanzania are this month expected to sign a $1.06 billion loan deal to build a natural gas pipeline from the south of the country to its commercial capital, Dar es Salaam.

Tanzania is also seeking a $400 million loan from Beijing to build another coal-fired power plant in the Mbeya region. (Editing by David Clarke and Jason Neely)

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