Mozambique coal bid threatens to run off the rails

Rio Tinto Group’s foray into Mozambique, which cost the world’s No. 2 mining company US$3 billion, has highlighted a lack of rail and port capacity that threatens to check a coal boom in the southeast African nation, reports Bloomberg. While finding coal in Mozambique has been a cinch, exporting it hasn’t. Rio’s plans have been stymied by the government’s refusal to allow it to barge coal down the Zambezi River because of its supposed un-navigability and by the cost of accessing or building rail lines to a port on the east coast. The bottlenecks may scupper Mozambique’s bid to become one of the world’s top five coking coal producers and expand a mining industry that currently accounts for less than 5% of gross domestic product. Mozambique, which is bigger in size than France, has a 2 470-kilometre coastline, three major ports - Nacala, Beira and Maputo - and 4 787kms of rail lines, according to the CIA World Factbook. Much of the transport system is in disrepair, a legacy of a 15-year-civil war that ended in 1992. Rival Vale SA is spending US$4.4bn on rail and port facilities in Mozambique to export coal from its Moatize mine, having exhausted existing capacity. The government wants Rio to partner with Vale in extending and upgrading a 912-km rail line from Tete through Malawi to the Nacala port. The line could add 11 million tonnes to coal shipping capacity by mid-2016 and is expected to reach full capacity of 18mt by 2017, according to the IMF. The IMF expects transport bottlenecks to ease as new rail capacity comes on line, and projects coal production will reach 9mt this year.