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ICVL to invest $500 m in its Mozambique coal mines

State-owned International Coal Ventures (ICVL) will invest $500 million to create logistic and other infrastructure support in the next 2-3 years at its recently acquired coal mines in Mozambique, a senior official of the PSU said.

ICVL signed the pact on July 28 to buy Rio Tinto's 65 per cent stake in Benga and 100 per cent each in Zambeze and Tete East coal assets in the African nation for $50 million.

ICVL signed the pact on July 28 to buy Rio Tinto's 65 per cent stake in Benga and 100 per cent each in Zambeze and Tete East coal assets in the African nation for $50 million.

Currently Benga, the only operational mine, produces about 5 million tonnes per annum and is making cash losses. The mines need creation of about 500 km railway line and port, he said.

"There are logistic issues. At this point of time it (mining operations) is making cash losses. There are about one billion tonnes of coal reserves available. It needs another $ 500 millions in the next two to three years. It is a very good strategic investment," the official said, adding that the immediate goal is to ramp up the production to 12 million tonnes per annum.

As of now, five million tons of coal is yielding two million tonnes of washed coal which is being taken by Tatas, a partner in Benga with 35 per cent stake, he said.

As of now there is no plan to rope in a third partner for creation of necessary infrastructure for ramping up of production, he said.

"It needs about Rs 3,000 crore ($ 500 million). All the PSUs can put together and invest over a period of time. I don't see any necessity for an outsider to join us," the official explained.

ICVL, a joint venture of Steel Authority of India, Coal India, Rashtriya Ispat Nigam, NTPCBSE -0.10 % and NMDC, was created to ensure long-term security of supply of the critical raw material for the steel industry. NTPC has expressed its intention to opt out of the JV.

Replying to query, he said the PSU is mulling to appoint senior and experienced person to head Mozambique operations.

"We are trying to put a core team headed by an expert (in coal mining for Mozambique). The person may not necessarily be from the four PSUs. He could be an outsider also. Except Coal India, none of the partners have much of coal mining experience," the official added.

Rio Tinto had bought these assets through acquisition of Riversdale Mining Limited in 2011 for $ 4 billion. However, in 2013, it wrote off $ 3.5 billion of the purchase price.

All three assets put together are estimated to hold about 2.6 billion tonnes of coal reserves.

Source: PTI