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Mozambique Mining Report Q1 2011
Business Monitor International, Jan 2011, Pages: 53
Business Monitor International's Mozambique Mining Report provides industry professionals and strategists, corporate analysts, mining associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Mozambique's mining industry.
There can be few better indicators of the growth potential of Mozambique's mining sector than Rio Tinto's recent GBP2.2bn bid for Australian-owned Riversdale Mining, a company with significant mining interests in the southern African state. The valuation of Riverside, which owns the rights to the recently opened Benga coal mine in Tete province, is a reflection of the importance of the company's role in Mozambique's fast-growing coking coal sector. Output at Benga is expected to reach 5.3mtpa (million tonnes per annum) in 2011 before potentially rising to 20mtpa by 2014/2015, making it one of the largest operations in Mozambique.
Rio's interest in Mozambique is perhaps of little surprise given that one of its largest rivals, Brazilian mining giant Vale, already has a substantial foot-hold in the country through its Moatize project where production is due to begin in the second half of this year. The opening of the mine, coupled with the expansion of Benga and other facilities stand to significantly increase the country's coal production and will allow the mining sector to diversify away from bauxite and aluminium production.
Rio Tinto's approach for Riversdale mining could initiate a bidding war between some of the larger miners who are eager to control a company with significant undeveloped reserves of a commodity which is in increasing demand across southern and eastern Asia in particular. Vale, Xstrata, Anglo American and the US group Peabody Energy have also previously stated an interest in acquiring shares in the company, and thus may be interested in a share of Riversdale. As yet, Rio Tinto has been the only company to have made an offer for Riversdale and the deal is far from certain. Any takeover will have to be approved by the company's stakeholders including Tata Steel, Brazilian steelmaker CSN and US investment firm Passport Capital.
In 2011, BMI forecasts Mozambique's mining sector to experience a surge in growth as a series of new projects come online across the country. The industry is expected to expand by 27% this year while in value terms it will grow by 40% to US$129mn. As mentioned, the coal sub-sector will be one of the main drivers and in 2011 we forecast the country's hard coal production to rise by 86% to 69,000 tonnes.
Aside from increased in investment in mining facilities, Mozambique owes much of its anticipated increase in production levels to the recent development of the country's freight transport system which, in recent years, has proved one of the major obstacles to growth. Among the major projects taking place are much-needed upgrades to the country's commercial seaport network which currently ranks 104th out of 139 states surveyed by the World Economic Forum's 2010-11 Global Competitiveness Report. Investment in Maputu and Beira ports is being provided by Coal of Africa (CoA) and Vale respectively.
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