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Indian companies active in the Moz coal sector weighing their options

18th August 2017

By: Keith Campbell

Creamer Media Senior Deputy Editor

     

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Indian State-owned consortium International Coal Ventures Limited (ICVL) is considering a plan to convert the coal it produces at its Benga operation, in the Tete province of Mozambique, into gas, to make it easier and cheaper to export fuel to India. This has been stated by Indian Steel Minister Chaudhury Birender Singh, speaking to The Telegraph newspaper of Kolkata (Calcutta).

“We are now evaluating a proposal by Niti Aayog (National Institution for Transforming India) to gasify the coal and turn it into methanol to be shipped back and used in gas-fired power plants in India,” he said. “The gasification idea is new . . . we will study its cost economics. The Niti Aayog is sure it can work. Once government as a whole is convinced, we will go ahead.”

Since ICVL bought 65% of the mine (from Rio Tinto, in 2014, for $50-million), it has found shipping the coal produced to India a problem, owing to lack of infrastructure and consequent high costs. Meanwhile, in India, there is a total gas-powered electricity generation capacity of 25 329 MW, of which 14 305 MW is either not working or working well below capacity, because of a lack of gas.

“There is significant potential for tapping coal-bed methane from the acquired coal resources,” an unnamed ICVL official told the newspaper. Analysts in India, however, cautioned the publication that “the problem is that the bottom of the natural gas market has been knocked off by shale gas prices”.

ICVL was created at the initiative of the Indian Ministry of Steel as a “special purpose vehicle” to obtain metallurgical and thermal coal assets in foreign countries, in order to assure the supply of coal to India. It is a joint venture between Coal of India Limited, the National Mineral Development Corporation, NTPC (India’s largest power producer), Rashtriya Ispat Nigam Limited (better known as RINL – a steel company), and the Steel Authority of India Limited.

Mining at Benga was suspended in December 2015, owing to low coking coal prices, but has been restarted this year. The Telegraph reported that the mine has a current output of five-million tons a year (Mt/y) but has the potential to expand production to 12 Mt/y. Benga is primarily a metallurgical, or coking coal, mine, with reserves of 2.6-billion tons, of which 70% is coking coal. The remaining 35% of Benga is owned by Indian private-sector group Tata Steel.

Coal Terminal

Meanwhile, Mozambique’s Transport and Communications Ministry has signed a contract with Indian group Essar Ports to build a new coal terminal at the port of Beira. The company will also own 70% of the new terminal, with the other 30% belonging to the local State-owned group Ports and Railways of Mozambique (better known by its Portuguese initials, CFM). The first phase of the project will cost $275-million and will have a capacity of 10-million tons; it is scheduled for commissioning in the first quarter of 2020. The second phase will add another 10-million tons in capacity. This should greatly ease the logistical difficulties of both ICVL and other miners extracting coal in Tete province.

Separately, Indian group Mercator Limited, previously Mercator Lines Limited, has put its coal assets in Mozambique and Indonesia up for sale to finance the acquisition of the State-owned Dredging Corporation of India (DCI). This is the country’s largest dredging company and the Indian government, which currently holds 73% of the business, is expected to reduce its stake to less than 50%, if not dispose of it outright, later this year. DCI has a market value of $275-million.

Mercator is primarily a shipping and dredging group, but its owns three coal mines in Indonesia and a coal mining licence in Mozambique. It is also active in the oil and gas sector. Business newspaper the Mint (a sister publication of The Hindustan Times) quoted an unnamed source “aware of the development” as saying “Mercator has identified shipping and dredging as its core business. They are looking to grow aggressively in the Indian dredging business through various means, including rapid organic growth through fleet expansion and also potential acquisitions.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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