“Rio Tinto Group’s foray into Mozambique, which cost the world’s No. 2 mining company $3 billion, has highlighted a lack of rail and port capacity that threatens to check a coal boom in the southeast African nation.
Rio bought coal producer Riversdale Mining Ltd. for A$3.9 billion ($4 billion) in 2011 to access some of the world’s best untapped coking coal, in the Moatize basin in Mozambique’s northwest Tete province. Now Rio is writing the value down by 70 percent and a person familiar with the matter says the London- based company is considering selling them.
While finding coal in Mozambique has been a cinch, exporting it hasn’t. Rio’s plans have been stymied by the government’s refusal to allow it to barge coal down the Zambezi River and by the cost of accessing or building rail lines to a port on the east coast. The bottlenecks may scupper Mozambique’s bid to become one of the world’s top five coking coal producers and expand a mining industry that currently accounts for less than 5 percent of gross domestic product.
“We see a lot of problems now with the big players who are putting big money into Mozambique,” Peter Major, head of mining at Cape Town-based Cadiz Corporate Solutions, said in a Feb. 6 interview. “There are stockpiles of coal and they can’t get it onto trains. Even if the trains get the coal to the port, the port can’t handle it.”
Mozambique, which began commercial coal production in 2010, boosted output to about 5 million metric tons last year from 600,000 tons in 2011, according to the International Monetary Fund. About 280 million tons of coking coal, used in steelmaking, are traded annually on the seaborne market.
