State-owned International Coal Ventures (ICVL) will invest $500 million to create logistics and other infrastructure support in the next 2-3 years at its recently acquired coal mines in Mozambique, a senior official of the PSU said.
ICVL is also looking to appoint a full-time official with rich experience in coal mining to head the operation of the Mozambique mines to turn them into a profitable venture, he said.
The company had signed the pact on July 28 to buy Rio Tinto’s 65 per cent stake in Benga and 100 per cent stake each in Zambeze and Tete East coal assets in the African nation for $50 million.
Currently Benga, the only operational mine, produces about 5 million tonnes per annum and is making cash losses. The mines need creation of about 500 km railway line and port, he said.
“There are logistic issues. At this point of time, it (mining operations) is making cash losses. There are about one billion tonnes of coal reserves available. It needs another $500 million in the next two to three years. It is a very good strategic investment,” the official told PTI, adding that the immediate goal is to ramp up the production to 12 million tonnes per annum.
As of now, five million tonnes of coal is yielding two mt of washed coal which is being taken by Tatas, a partner in Benga with 35 per cent stake, he said.
As of now, there is no plan to rope in a third partner for the creation of necessary infrastructure for ramping up production, he said.
“It needs about Rs 3,000 crore ($500 million). All the PSUs can put together and invest over a period of time. I don’t see any necessity for an outsider to join us,” the official explained.
ICVL, a joint venture of Steel Authority of India, Coal India, Rashtriya Ispat Nigam, NTPC and NMDC, was created to ensure long-term security of supply of the critical raw material for the steel industry. NTPC has expressed its intention to opt out of the joint venture.
Replying to a query, he said the PSU is mulling to appoint a senior and experienced person to head Mozambique operations.
“We are trying to put a core team headed by an expert (in coal mining for Mozambique). The person may not necessarily be from the four PSUs. He could be an outsider also. Except Coal India, none of the partners have much of coal mining experience,” the official added.
Rio Tinto had bought these assets through the acquisition of Riversdale Mining Ltd in 2011 for $4 billion. However, in 2013, it wrote off $3.5 billion of the purchase price.
All three assets put together are estimated to hold about 2.6 billion tonnes of coal reserves.