February 6, 2013 / 8:51 PM / in 5 years

RPT-Mozambique confident of solution to Rio's coal transport problem

(Repeats story first published late Weds; no change to text)

* Mozambique says Rio open to dialogue

* Mozambique targets coal output of 100 million T by 2020

By Clara Ferreira-Marques

CAPE TOWN, Feb 6 (Reuters) - Mozambique’s mines minister is confident of reaching a deal with Rio Tinto to solve the miner’s problem of transporting coal to ports, which contributed to a recent $3 billion hit to its balance sheet.

Minister Esperança Bias said on the sidelines of a conference in Cape Town that Rio was “open to continue working with the government”, brushing aside speculation the company could simply pull the plug.

“Naturally we worry. But if you look at Rio Tinto’s problems, they were not just in Mozambique,” she said.

“Mozambique was only part of the problem, and we believe we can find a solution.”

Rio last month sacked its chief executive and took a $14 billion writedown, including around $3 billion related to coal assets in Mozambique, which it bought just two years ago in a $4.2 billion deal.

Rio originally hoped to send coal down the Zambezi river by barge, only to find its plans scuppered by the government. The company said infrastructure had proved more challenging than forecast and estimates of recoverable coking coal lower than expected.

Rio’s troubles have been seen as a cautionary tale for miners considering major projects in countries with little or no infrastructure, at a time when major producers also face increasingly risk-averse investors.

Stretching along Africa’s southeast coast, Mozambique holds some of the largest untapped deposits of coking coal and is also in a prime position to supply growing markets in Asia.

But infrastructure has proved a major challenge, and many analysts say it could delay a long forecast coal boom. The government is targeting coal production of 100 million tonnes in the next decade, compared with exports estimated at just a fraction of that last year.

“I believe that today (infrastructure) is a constraint, but probably tomorrow it will not be,” Bias said.

Rio’s barge plan will not be approved because the Zambezi river is not navigable, but a rail solution is viable, she said.

“Many studies have been done on navigability of Zambezi river, and they advise it is not navigable,” she said in an interview.

“There are other alternatives that need to be explored, and the most efficient is rail.”

Local industry sources have said Rio initially wanted a railway, which would be privately-owned and operated, a model which has worked in Australia. This met with reluctance in Mozambique, where the government has tried to keep infrastructure in state hands.

The company is now considering options for a rail link open to other users, possibly also outside mining.

“It is our strategy that transport links for any product should allow free access for others. It makes no sense to dedicate a line for one product,” Bias said, adding that miners active in the region should cooperate to find a solution.

“It makes complete sense that companies cooperate to find a solution to export products.” (editing by Jane Baird)

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