The Hindu Business Line : CIL, SAIL join hands to develop coal mines in Mozambique

COAL India Ltd (CIL), jointly with Steel Authority of India Ltd (SAIL), has submitted an expression of interest (EOI) to the Mozambique Government for developing virgin coal mines in that country.

The EOI was submitted last week, responding to a global tender floated by the Ministry of Mineral Resources and Energy of Mozambique.

This is the first time that the CIL-SAIL combine has proposed a business venture abroad, which is expected to be beneficial to each other. However, coal industry sources are surprised that SAIL has joined hands with CIL to develop coal mines in Mozambique, particularly when the shelf-life of the coking properties of Mozambican coking coal is short. Incidentally, SAIL imports a large quantity of coking coal.

The sources point out that they are aware that SAIL has been toying with the idea for quite some time to develop coking coal mines abroad, jointly with CIL or any well-known international coal company. It has targeted mainly Australia, Indonesia and South Africa. The sources also have reservations about the success of commercial mining of even non-coking coal in Mozambique if the coal is exported to India. They feel that CIL-SAIL may have some other commercial considerations.

Admitting that the CIL-SAIL combine has submitted an EOI for developing virgin coal blocks in Mozambique, a senior level CIL source said that attempts were being made to develop coal mines abroad in anticipation of growing demand and supply gap vis-à-vis the availability of domestic coal. Since terms and conditions, as mentioned by the Mozambican government authority, appeared reasonable, CIL had submitted an EOI. The source said that there was a possibility of setting up CIL's proposed joint venture, named Coal Videsh Ltd, with the initial entry of coal mining activities in Mozambique.

It is pointed out that Mozambique has immense coal reserves, estimated to be around 15 billion tonnes (bt). The Moatize and Mucanha Vuzi coal basins in Tete Province contain several coal seams holding up to 1.8 bt of coal. Coal production in Moatize reached 5,00,000 tonnes per annum in the 1980s. But supply had dwindled since the production was disrupted by civil war, which is reported to have damaged the local infrastructure and which is yet to be fully recovered.

The coal bearing area in Mozambique is now beginning to attract investment and evacuation of such coal has already begun.