Vale opens new coal mine in Mozambique

A representative of Brazilian mining giant Vale, explains the future and present structures 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. "Vale celebrates today the beginning of mining activities at its coal mining projects in Moatize, in the Tete province of Mozambique, ahead of operations at the processing plant," the company said in a statement.
Mozambican President Armando Guebuza and outgoing Vale chief Roger Agnelli attended the opening ceremony in Moatize outside the city of Tete in northwest Mozambique to mark the largest single investment to date in one of the world's poorest countries.
Vale plans to start production in July and export one million tonnes of coal from the $1.7 billion (1.2 billion euro) project 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 %.
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. But concerns remain about getting the product to market as infrastructure renovation lags behind.
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 in the country, 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 with India's Jindal Steel and Power in February. The company hopes to produce 11 million tonnes a year when the mine opens in 2012.
But transport issues still loom large over the projects.
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, forcing authorities to reconsider their contract with Indian consortium Ricon.
Work is also unfinished on 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 country's only deep-water port.
Vale has improved 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 differed from the approved model and 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.