COAL INDIA MAY PULL OUT OF MOZAMBIQUE

The Indian state company Coal India (CIL) is likely to scrap its investment in Mozambique, according to a senior executive in the company, speaking anonymously to the Indian publication “Economic Times”.CIL acquired two blocks, A1 and A2, in the Moatize district of the western Mozambican province of Tete in 2008. It then set up a Mozambican subsidiary, Coal India Africana, to handle exploration and production.For six years everything seemed fine, with a string of optimistic statements from CIL. But now the anonymous CIL executive has claimed that the quality of the coal in the two blocks is so poor that it cannot even be burned by coal-fired Indian power stations.'The reserves in the two blocks do contain carbon, but it is not good enough to be called coal”, he said. “This reserve cannot sustain a 12% rate of return on investment in the medium to long run. Simply put, it is not coal”.He claimed that CIL had been led to believe that 20 per cent of the deposits in the two blocks would be high quality coking coal that could be used in steel making, while the rest was thermal coal that could be used to fuel power plants.He said that after samples from the two blocks had been sent to India for analysis, the quality of the coal was found to be “extremely inferior” – so much so that it could not even be described as coal. Moatize is known to sit on huge coal deposits, some of which are currently being exploited by the Brazilian mining giant, Vale, and by a second Indian company, International Coal Ventures Limited (ICVL), which last year purchased Rio Tinto’s Mozambican coal assets.If the anonymous executive is to be believed, CIL was unlucky enough to strike a part of Moatize which, defying the geology of the rest of the region, contains no coal.Meanwhile, ICVL, which is also owned by the Indian state, is pushing ahead with plans to invest two billion US dollars in Mozambican coal. This includes plans to mine 13 million tonnes of coal annually, a project to transform coal into liquid fuels, and a power station to be built at the mouth of the Benga mine in Moatize district.