Anglo grabs a stake in Mozambique coal boom

VANCOUVER — Mining-giant Anglo American (AAL-L) looks to have finally secured a slice of a frenzied coal-mining push in the southern Tete province of Mozambique. Anglo has been exploring acquisition options in the area in a bid to lockdown a strategic piece of the African nation’s growing coal reserves, and on July 24 the London-based miner announced its intention to pull the trigger on a U$555-million deal for the Revuboè metallurgical (met) coal project.

Anglo is acquiring a 58.9% stake in the joint-venture project — located in Mozambique’s Moatize coal basin — from Australian coal magnet Ken Talbot’s estate in an all-cash deal that is expected to close in September. Additional conditions of the agreement have not yet been released.

“The acquisition of a majority interest in Revuboè is in line with our strategic commitment to grow our global metallurgical coal business to supply our customers from each of the key metallurgical coal supply regions of Australia, Canada and Mozambique,” stated Anglo CEO Cynthia Carroll. “The asset is located in the most attractive area of Mozambique’s coal regions and has a number of infrastructure development options. We look forward to working with the government and our joint venture partners to progress this exciting prospect.”

Despite current weaknesses in both thermal and metallurgical coal demand, major mining outfits have been scrambling to acquire worldwide assets in a bid to secure future production streams. Mozambique already hosts coal mines owned by mega-miners Rio Tinto (RIO-N, RIO-L) and Vale (VALE-N), which currently operate mines contiguous to Anglo’s Revuboè acquisition. The African country is viewed as a key location due to its shipping potential to major industrial coal consumers like China and India.

Anglo will purchase a majority in the Minas de Revuboè joint-venture, which includes a 33.3% interest held by Japan’s Nippon Steel Corp. and a 7.8% stake held South Korean steel-giant POSCO.

Extensive exploration at the project started-up in 2005 under prospecting license 693L, eventually delineating a major interbedded seam coal deposit over 38.6 sq.km. The deposit holds an in-situ indicated resource of 1.4 billion tonnes of hard-coking and thermal coal primarily hosted in the Chipanaga Upper, Chipanaga Lower, and Bananeiras seams.

According to a presentation by Minas de Revuboè management at the International Mining and Metals coal conference in Maputo on July 4, Revuboè is expected to produce from 4 million to 4.5 million tonnes of hard-coking coal and between 2 million and 2.5 million tonnes of thermal coal per year, though the figures are subject to anticipated rail and port capacities.

Current studies indicate that the project is best suited for traditional open-cut strip mining, based on steep deeps in the seam floors and faults in the deposit. Revuboè’s life is estimated at 25 years, with initial operations starting up via a box-cut in the Chipanga seam aimed at lowering strip ratios and maintaining a high margin of coal recovery.

Minas de Revuboè has modelled a standalone coal-handling and preparation plant with a capacity of 2,400 tonnes-per-hour, which would be installed in two phases. Anglo will have to deal with power and transportation challenges as Revuboè moves towards development, and the site also lacks access to a suitable water supply.

Infrastructure synergies with peers Rio and Vale may be possible, though both companies are already encountering shipping challenges in the underdeveloped African nation. Vale commited US$6 billion to infrastructure upgrades at its nearby Moatize coal project this past November in a bid to lift output to 20 million tonnes per year by 2014. US$4.4 billion of Vale’s investment will be put towards a new coal terminal at the northern port of Nacala, as well as a 912-km railway connection.

Rio exported an inaugural coal shipment from its Benga and Zambeze mines in June. Totalling 34,000 tonnes of hard-coking coal, the shipment departed the Indian Ocean port of Beira en route to purchaser Tata Steel. Rio is exploring shipping its coal by barge. The company is in discussions with Mozambiques government to use the nearby Zambezi river as a shipping avenue.

“We’re continuing to work with the government of Mozambique to secure the development of comprehensive infrastructure for efficient transport of coal from mine to port, which is a priority for the further development of the region,” explained Rio’s energy CEO Doug Ritchie in a statement.

Revuboè is in a much earlier stage of development, having yet to receive its environmental permitting from Mozambique authorities. Markets may also question the fact that the project has not been put through any sort of stringent feasibility testing, so there has yet to be a firm capital cost figure associated with project development.

According to figures released by Bloomberg, Anglo paid roughly 67¢ per resource tonne in the deal, which is “broadly in line” with comparable acquisitions in the sector. Foreign investment in Mozambique’s mining development is expected to reach US$14 billion in the next four years, with US$9.5 billion already allocated for the country’s coal reserves.