India: SAIL plans to double capacity at its Benga coal mines in Mozambique

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India: SAIL plans to double capacity at its Benga coal mines in Mozambique

6:07 CAT | 11 Sep 2024

FILE - For illustration purposes only. [File photo: Folha de Maputo]

PSU steel major, Steel Authority of India Ltd (SAIL), is set to more than double the capacity of its Benga coking coal mines in Moatize district, Tete province, in Mozambique, targeting nearly 4.5 million tonnes per annum (mtpa).

This move is part of SAIL’s broader strategy to enhance coking coal supplies, a key raw material in steelmaking, and reduce exposure to price fluctuations in the global market.

The planned investment in the expansion is estimated at $150-200 million over the next three to four years, according to sources. SAIL has traditionally relied on imported coking coal from countries such as Russia, in addition to domestic supplies from Coal India.

International Coal Ventures Ltd (ICVL), the joint venture that oversees the Mozambique mines, has already floated global tenders to bring in mine development operators. ICVL is owned by a consortium of Indian PSUs, with SAIL holding a 47% stake.

In FY24, Benga produced around 1.24 million tonnes, as reported by NMDC, another PSU involved in the venture. The mine’s current capacity is 2 mtpa, but the proposed expansion is expected to boost production significantly over the next few years, with most of the output earmarked for SAIL’s internal use.

“We are looking to double production at Benga as part of our strategy to secure coking coal resources,” said Amarendu Prakash, Chairman of SAIL and ICVL board member, during the Indian Steel Association’s annual conclave. “The expansion should be completed within three to four years.”

The tender specifies that the Benga mine operator will be responsible for extracting 375,000 tonnes of coal per month, which equates to an annual output of around 4.5 million tonnes. Additional tasks will include topsoil removal and coal loading.

SAIL is also seeking shareholder approval at its Annual General Meeting (AGM) for a long-term supply agreement with Minas de Benga Limitada (MBL), a joint venture company in Mozambique that produces coking coal. The deal is expected to be worth up to ₹6,000 crore by FY26, ensuring a steady supply of high-quality coking coal for SAIL’s steel manufacturing operations.

In addition to Benga, ICVL has two other coal mines in Mozambique—Zambeze and Tete East—though these remain in the development phase.

SAIL’s move comes as the company faces rising costs for imported coking coal, with average prices reaching ₹24,500 per tonne in the April-June quarter, compared to ₹13,500 per tonne for domestic coal.

Looking ahead, SAIL also expressed interest in participating in India’s Critical Mineral Mission, which aims to secure supply chains for essential minerals like lithium, cobalt, and copper. While SAIL’s focus has traditionally been on minerals used in steelmaking, Prakash indicated that the company may explore opportunities as the mission’s scope expands.

Source: Hindu Business Online