Vale plans $6 billion expansion of Mozambique coal mine

MAPUTO Tue Nov 22, 2011 11:17am EST

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MAPUTO (Reuters) - The board of Brazil's Vale (VALE5.SA) has approved a $6 billion expansion of its Moatize coal project in Mozambique to lift output to 22 million tons per year from the 11 million tons it expects to mine initially, a company official said.

Marcelo Matos, general manager for marketing and sales at Vale's coal unit, told a coal conference in Maputo on Tuesday that first production from the expanded mine is forecast for the second half of 2014.

"Moatize is a great alternative to (supply) the growing seaborne market, it's in a very strategic location and there is a lot of interest (for the coal)," Matos told a conference in Maputo.

Some 70 percent of the coal coming from the expansion will be coking coal, a key steelmaking ingredient, and the remainder thermal coal, along with a similar split in the first phase, which began this year.

Vale has been exporting small amounts of thermal coal since September. First exports of coking coal are expected to start in December and be increased to commercial scale by around March next year.

All export growth plans would have to overcome the woeful state of Mozambique's infrastructure.

The expansion of Moatize will include about $4.4 billion dedicated to the building of a new coal terminal at the northern port of Nacala and a 912 km rail line connecting the coal mine with the port, partially passing via Malawi.

The deep-water Nacala port is seen as more adequate to handle panamax vessels than the shallower one at Beira, from where Vale's first exports have been shipped.

The line and the port will initially have a capacity of 18 million tons to meet Vale's rising demand for exports.

The sharing of that capacity with other entities would need to be discussed and would happen under certain conditions, Matos said, but did not give details.

"The investments that are planned are for our own expansion," he said.

Mozambique is planning to establish a framework for how infrastructure projects are planned and who will benefit, to ensure all the projects expected to come online in coming years will get access to ports and rail.

For now, miners such as Beacon Hill Resources (BHRB.L) have to rely on trucks to get their product to the port and will plan the ramp up of their mines in line with available infrastructure.

"Our mine ramp-up is governed by access to infrastructure," said Justin Lewis, chairman of the AIM-listed miner.

All miners presenting at the conference commended Mozambique for the progress made in the last year and said they were confident the former Portuguese colony would manage to supply them the capacity they need.

Vale's Matos also said the company is planning to build a 600 MW thermal power plant at Moatize, but the company is still looking for international investors to help fund the project.

The company may also develop a coal-to-liquids project at the site, he said, but did not give details.

(Reporting by Agnieszka Flak, editing by Ed Stoddard; Editing by Anthony Barker)

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