Coal India pulling out of Tete

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Coal India pulling out of Tete

9:07 CAT | 31 Aug 2016

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The state-controlled mining company Coal India, the largest coal producer in the world, is surrendering its exploration licences in the western Mozambican province of Tete.

According to reports in the Indian press, the two areas covered by the licences, awarded to the company’s wholly owned subsidiary, Coal India Africana (CIAL), proved disappointing. The latest annual report from Coal India claimed that mining would be “technically not feasible” in the licence areas.

“A mineability study has been undertaken based on the findings of the geological report”, it said. “The findings of the mineability study revealed that it is technically not feasible to do mining in the licence areas of CIAL. Accordingly, CIL board accorded its approval for surrender of prospecting licences to the Government of Mozambique.”

The coal mining licences were awarded to CIAL initially for the period from August 2009 to August 2014

They covered a total area of 224 square kilometres. But the initial geological exploration showed that, in 170 square kilometres, there was no significant occurrence of coal deposits to a depth of 500 metres.

That area was surrendered, but Coal India retained the remained 54 square kilometers, for which the Mozambican authorities issued fresh licences valid until August 2019. But Coal India has now decided to relinquish these as well, supposedly based entirely on the geological report.

Company sources, cited in “the Telegraph” of Calcutta, said that samples sent from Mozambique after exploratory drilling showed “it would be difficult to undertake commercial exploitation”.

In February 2015, a company source told the Indian publication “Economic Times” that the quality of the coal found in the two licence areas is so poor that it cannot even be burned by coal-fired power stations.

Last year, Coal India announced its withdrawal from the joint venture which bought Rio Tinto’s Mozambican coal assets. In 2014, ICVL (International Coal Ventures Limited) purchased those assets for just 50 million US dollars. At the time this seemed an incredible bargain given that Rio Tinto had bought the same assets in 2011 for 3.9 billion dollars.

However, in February 2015 Coal India, which owns a 28 per cent stake in ICVL, informed the Bombay Stock Exchange that its Board had decided that the company would withdraw from ICVL.

ICVL is a joint venture between five Indian state owned concerns, namely the Steel Authority of India Ltd (SAIL), Coal India Ltd, Rashtriya Ispat Nigam Ltd (RINL), NTPC Ltd and NMDC Ltd. It was set up to acquire coal assets abroad in order to guarantee secure supplies of coking coal for the Indian steel industry.

Source: AIM