The Indian state-owned International Coal Ventures Ltd (ICVL) intends to invest 500 million US dollars over the next three years in logistics and infrastructure for the coal assets in Mozambique which it purchased recently from the Anglo-Australian company Rio Tinto.
According to a senior ICVL official cited in the Indian press, ICVL is also looking to appoint “a full-time official with rich experience in coal mining to head the operation of the Mozambique mines to turn them into a profitable venture”.
“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 million dollars in the next two to three years. It is a very good strategic investment,” the unnamed official said.
ICVL acquired three concessions from Rio Tinto – its 65 per cent stake in the Benga open cast coal mine, and the Zambeze and Tete East projects, all in Tete province. Of these, only Benga is in production. If Zambeze and Tete East are included, the total coal reserves now controlled by ICVL amount to 2.6 billion tonnes.
Benga is currently mining five million tonnes of coal a year, and ICVL’s immediate goal is to push production up to 12 million tonnes a year.
The Riversdale purchase was one of several acquisitions which went sour, and forced Rio Tinto to write down its assets by a gigantic 14 billion dollars, leading to the resignation of the Rio Tinto Chief Executive, Tom Albanese.
The largest slice of the write-down was three billion dollars on the coal assets in Mozambique, which seem to have been wildly overvalued. Logistical headaches, the collapse of the price of coal, and a reassessment of recoverable resources all led Rio Tinto to cut its losses and sell off the coal assets to ICVL.
ICVL is a joint venture between five Indian state owned concerns, namely the Steel Authority of India Ltd, Coal India Ltd, Rashtriya Ispat Nigam Ltd, NTPC Ltd and NMDC Ltd. It was set up to acquire coal assets abroad, in order to guarantee secure supplies of coking coal for the Indian steel industry.
With a guaranteed market in India for the foreseeable future, fluctuations in the world market price of coal are not such a problem for ICVL as they were for Rio Tinto.
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