UPDATE 1-Mozambique reopens flood-hit coal export railway

Mon Mar 4, 2013 4:03am EST

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JOHANNESBURG, March 4 (Reuters) - Mozambique has reopened its Sena railway line, the only available rail coal export route for mining giants Vale and Rio Tinto , after a two-week closure due to floods, state logistics group CFM said.

The line, which connects the northern Tete province with the coast, was shut on Feb. 12 after heavy rains and a derailment, forcing Vale to declare force majeure on a number of coal shipment contracts.

Rio Tinto also declared force majeure to suspend open cast mining operations at its mine following the flood damage, its mining contractor, Eqstra Holdings, said.

"We have sent a letter to the coal exporters last week that the line is open although they have yet to start sending trains," Sancho Junior, director of the Sena railway rehabilitation project, which falls under CFM, told Reuters.

The shutdown was a further blow to firms already battling against infrastructure bottlenecks in the former Portuguese colony, home to vast reserves of steel-making coking coal.

The Sena line is currently the only railway available for mining companies to get minerals to port. Some companies are moving coal by trucks, although this is expensive.

Vale expects to lose 250,000 tonnes of coal shipments due to the shutdown. The Brazilian mining giant had to curtail its Mozambican output and export targets last year due to delays by CFM in increasing the capacity on the railway line.

Rio Tinto wrote down $3 billion on its Mozambican assets in January, partially due to infrastructure constraints.

Apart from an upgrade to the Sena line, Mozambique plans four major rail and port projects to raise annual coal export capacity from Tete to more than 120 million tonnes. The work is likely to take more than a decade to complete. (Reporting by Agnieszka Flak; Editing by Ed Cropley)

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