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Tete most favourable sub-Saharan Africa coal destination: Beacon Hill

Mozambique’s Tete coalfield has the most potential for development over the next ten years, when compared with other sub-Saharan African coal mining areas, such as the Trans-Kalahari corridor, stretching over Botswana and Namibia, and the Waterberg coalfields, in South Africa, London-listed Beacon Hill Resources CE Rowan Karstel said on Thursday.

Speaking at the Heavy Haul Rail Africa 2014 conference, in Sandton, he said Tete had the advantages of high-quality coal and being connected to good infrastructure and stated that Beacon Hill, which operated the Minas Moatize project in the region, was bullish about its potential.

“Mozambique has the most potential in sub-Saharan Africa because the Tete region has hard coking coal, the government is working on plans to increase the capacity of the Sena railway line to 20-million tons a year and there are big plans on the table for the development of Quay 13 at the Port of Beira,” Karstel said.

He further noted that, mining major Vale was developing the Nacala railway line and dredging was being considered to increase efficiencies at the Port of Beira.

Karstel also pointed out that Mozambique’s tax regime and mining contract system was favourable, explaining that, in terms of the legislation, the Mozambique government could hold up to 15% of a mining project to ensure that wealth was distributed to local people.

He stated that this system was much more favourable than other countries’ local participation measures such as South Africa’s black economic-empowerment system.

“There are some frustrations and challenges with [Mozambique’s] government but at least, at the end of the day, [it] is trying to take Mozambique forward [and] working with the mining sector, the unions are manageable, the environmental laws are reasonable and government is supporting you,” Karstel said, adding that, currently, mining companies had many more challenges in South Africa than in Mozambique.

“In this time and space, I would much rather be in Mozambique than in South Africa. It is a much more positive investment destination going forward to the next 20 years,” he said.

Meanwhile, Karstel noted that while the coking coal price was currently fairly depressed, the supply-demand balance still looked positive in future.

“If you look at the latest forecasts, coke exports out of Mozambique are expected to increase to ten-million tons by 2020,” he said.

Karstel stated that the major differential was Brazil and India, which made up nearly 50% of the future global coking coal demand growth, adding that Mozambique was well suited to serve both markets.

Further, with regard to thermal coal, Beacon Hill was specifically targeting the Indian market.

“Currently 25% of people in India do not have access to power and [the majority] of India’s coal reserves are in the north-east while power stations are being built in the south and west, which means that those power stations would be better served by imported coal,” Karstel explained.

He also pointed out that the Indian government’s five-year plan for 2007 to 2012 envisaged the generation of an additional 62 000 MW of power, of which a lot would be generated using coal as a fuel source.

“Mozambique is ideally suited to play in this market in future,” he said.

Source: www.miningweekly.com