Vale opens new coal mine in Mozambique

MOATIZE: Brazilian mining giant Vale opened a new $1.7 billion coal mine in Mozambique on Sunday, tapping the southern African country's thermal and coking coal reserves of around 23 billion tonnes.

Mozambican President Armando Guebuza and outgoing Vale chief Roger Agnelli opened the mine together by pressing a button that triggered an underground explosion, enabling the company to bring to the surface its first coal from the mine in Moatize, outside the city of Tete in northwest Mozambique.

As a giant smoke cloud mushroomed over the hundreds of VIP guests, a giant truck brought a symbolic load to a conveyer belt and onward to a coal washing plant.

‘A dream of decades today becomes a reality,’ said Guebuza.

‘What was a mere project in the past, today is a majestic undertaking in which natural resources drive the development of Mozambican human resources.’

The $1.7 billion (1.2 billion euro) project is the largest single investment to date in Mozambique, one of the world's poorest countries.

Vale plans to start production in July and export one million tonnes of coal this year, ramping up output to 11 million tonnes in a few years -- and, local officials hope, boosting Mozambique's current economic growth of 6.5 percent.

‘We surmounted all the challenges,’ said Agnelli, referring to the skills shortages and logistical headaches that have hampered the project.

Mozambique's coal reserves have lain relatively untapped since independence from Portugal in 1975. A civil war from 1977 to 1992 crippled the country's economy and decimated its infrastructure.

Two decades later, Mozambique is welcoming foreign investors to its mineral wealth and licking its lips at the prospect of a boom.

In 2004 Vale became the first international mining giant to be granted a concession in Mozambique. At the peak of preparations, the company counted 7,500 workers, mostly Mozambican.

Australian mining company Riversdale, in a partnership with India's Tata steel, will also start operations later this year at a nearby coal mine, hoping to produce six million tonnes a year by 2016.

Mozambique signed a third large coal contract in February with India's Jindal Steel and Power, which hopes to produce 11 million tonnes a year from 2012.

But concerns remain about getting the coal to market as infrastructure renovation lags behind.

Reconstruction of the 600-kilometre (372-mile) Sena railway line that connects coal-rich Moatize district to the Indian Ocean port city of Beira is still not finished. Nor is the coal terminal at the port.

Even when ready, the Sena line will only be able to handle six million tonnes of coal a year -- four million allocated to Vale and two million to Riversdale.

Those caps are less than half the companies' respective export goals.

Vale is investing in another railway line from Tete to the northern port of Nacala, the coutry's only deep-water port.

Vale has finessed its image in Mozambique by financing the construction of Africa's first HIV drug factory and a study to map the country's potential as a biofuels producer.

But the company was criticised for the resettlement of 1,300 families to make space for the mine. A report by the Centre for Public Integrity found the resettlement houses were built with leaky roofs and without foundations.

Exiting chief executive Agnelli, whose departure was announced last month, has overseen the project since Vale won the concession seven years ago.

This is expected to be his last trip to Moatize before handing the reins to former company executive Murilo Ferreira on May 22.

‘I want to tell you this was only the start,’ said an emotional Agnelli. ‘There is still much to do.’