UPDATE 1-Brazil's Vale to build $1 bln rail lines in Malawi

Wed Jan 11, 2012 5:04am EST

* Vale subsidiary to build 138 km of new rail

* Malawi to save $120 mln in annual transport costs (Adds details, changes byline and dateline)

LILONGWE Jan 11 (Reuters) - Malawi has signed a $1 billion deal with Brazil's Vale for the construction and rehabilitation of a rail line that will transport 18 million tonnes of coal from Mozambique, government officials said on Wednesday.

Vale Logistics, a subsidiary of mining giant Vale, will build a new 138.5 km (86 mile) line from Chikhwawa in the south, to meet an existing line at Balaka. It will also rehabilitate 98.6 km of the existing link between Nkaya to Nayuchi.

"Vale will invest about $1 billion in Malawi over a period of three years for construction and rehabilitation of the railway line and it is expected to employ 4,500 workers of which 70 percent will be Malawians," Minister of Transport Sidick Mia told Reuters.

The railway will have annual haulage of at least 5 million tonnes of general Malawian cargo.

Distances can be cut in transporting Mozambican coal by taking cargo through neighbouring Malawi. Mozambique has some of the world's largest untapped coal reserves.

"It's expected that Malawi will be saving in excess of $120 million annually in transportation costs and this has an overall effect of reducing the transport costs of goods to and from Malawi by about 40 percent," he said. (Reporting by Mabvuto Banda; writing by Helen Nyambura-Mwaura; Editing by Jon Herskovitz)

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