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Indian Government targets coal reserves in Mozambique (mdn)

By on December 14, 2010

Indian steel ministry has asked a consortium of five state-run companies (International Coal Ventures) to consider a bidding for Mozambique’s coal reserves belonging to Riversdale MiningRiversdale, an Australian company who’s shares are traded on the Sydney Stock Exchange, owns mining concession for 13 billion tons coking coal  reserves situated in the Benga bassin  (Zambezia Province).  Coking coal is  more expensive than other qualities. It is mainly utilized in steel production (2 tons of coke fore every 3 tons of iron) and in thermal power plants. Prices on the asian market jumped to around $225 a metric ton in december, from $129 dollars earlier  in January this year.

Indian companies are scouting for coal assets overseas as local production in India is insufficient to meet demand.  So the  acquisition should  help steel and power companies to secure supplies for their expanding needs.  Their offer will be in concurrence with an other pending  takeover by  the Australian Rio Tinto company, a major  mining group. Rio Tinto is supposed to submit a takeover proposal of  3.55 billion US dollars for Riversdale.

International Coal Ventures was formed in 2007 as a joint venture among Steel Authority of India , National Mineral Development Corporation of India,  Rashtriya Ispat Nigam (a steel producer) and  Coal India.  Steel Authority and Coal India each hold 28% of  the Consortium, while the other three own 14% each. The consortium has been looking for thermal and coking coal assets in New Zealand, Mozambique and the U.S., but so far hasn’t been able to get through a deal. The Indian Economic Times newspaper informs  that Tata Steel may also explore a joint bid with National Mineral Development for Riversdale to counter Rio Tintos offer. Tata Steel already  holds a 24% of Riversdale’s shares.

According to a report by the Australian consulting, Wood Mackenzie, Mozambique is targeted to be the world’s  second major  coking coal supplier by 2025. Today there are around 172 million tons of hard coking coal traded by sea every year. Two thirds of this are exported, today, from Australia.  Mozambique is still not a significative exporter, but that will change soon.  In 2025 world trade  will jump to 307 million tons, and at that time, the Australian share will come down to 50%. And Mozambique will rank in the second position with an 18% market share. Accroding to WoodMcKensie, till now, chinese steel and power companies didn’target for coal concession in Mozambique event if they alo need o secure long term supplies for their growing coking coal consumption. They are mainly oriented to acquire concession in coal rich Mongolia and possibly in Australia where there are however strong local resistence to authorize foreign  (and specially chienese) ownerhip of local mining resources.

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