UPDATE 1-Rio Tinto among main bidders for Mozambique rail project

Wed Apr 10, 2013 3:27pm EDT

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By Agnieszka Flak

JOHANNESBURG, April 10 (Reuters) - Mozambique has named miner Rio Tinto as one of six preferred bidders for a new $3 billion railway and port development project to boost coal exports, the country's transport minister said on Wednesday.

The former Portuguese colony, which emerged from civil war two decades ago, boasts some of the world's largest untapped coal reserves and is expected to become a key source of sought-after premium, hard coking coal used in steel making.

Infrastructure bottlenecks have become a major headache for mining companies in Mozambique's coal-rich Tete province, with some projects delayed or put on hold due to problems of getting coal to port.

Rio Tinto wrote down $3 billion of its Mozambican assets in January, partially because of infrastructure constraints. Winning the bid could be a major boost for its project.

"We had 21 companies in the pre-selection phase and we have selected six preferred bidders, who are now preparing their full bids," Transport Minister Paulo Zucula told Reuters by phone.

Apart from Rio Tinto, mostly logistics companies were among the final six, with a winner to be chosen by July, Zucula said.

The tender is for a 525 kilometre (325-mile) rail line from Tete province to Macuse, in Mozambique's Zambezia province, and for a new port able to initially handle 25 million tonnes of cargo per year, with a potential to double that in the future.

Brazilian mining giant Vale is investing $4.4 billion to revamp another, much longer railway line from Tete province to the deep-water port at Nacala via Malawi.

MULTI-USER

The winner will be required to source the funds, and will also have to transport non-coal cargo and passengers, given needs to boost growth in a country where more than half live below the national poverty line of around $0.65 a day.

"We are not building infrastructure just for coal," Zucula said. "We are not like Australia that already has infrastructure for everybody and can then dedicate infrastructure for a specific commodity. It's not our case."

Current transport is limited to the Sena line, the only railway linking the coal-rich Moatize basin with the Beira port, and Zucula said a much-delayed upgrade of the line to 6 million tonnes from 3 million last year has finally been completed.

A further upgrade to 20 million tonnes on that same line is scheduled for completion within 18 to 20 months, he added.

"By the end of 2015 we will have a total coal export capacity of more than 30 million tonnes," he added.

Zucula said he did not foresee any problems in companies sourcing funds to pay for the infrastructure, but he expressed concern that delays may force some steel producers, especially from Asia, to source their coking coal from elsewhere.

"In terms of timing, I am really concerned, so that's why we are pushing," he said.

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