Vale Invests $4.4 Billion in Link Malawi and Mozambique Rail Networks

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Written by Richard Finlayson, Senior International Editor for Industrial Info resources (Sugar Land, Texas)--Brazilian mining giant Vale S.A. (NYSE:VALE) (Rio de Janeiro, Brazil) continues to pump investments into Africa's transport infrastructure to increase capacities and delivery speeds in the ore and coal supply chain to seaports. The company has signed a deal with Malawi's government to build a 140-kilometer rail line from the west of the country to link up with the existing rail network.

Vale will invest $1 billion over a three-year period to build the new line and to rehabilitate a 99-kilometer rail link from Nyaka to Nayuchi. The project will employ a workforce of 4,500, of which 70% will be Malawians.

Sidik Mia, the country's transport minister, said that the government was excited by the project, as it would assist the country in ensuring a coordinated transport system through the guaranteed access and transportation of cargo and passengers.

The benefit for Vale will be that transportation distances can be reduced by railing Mozambican coal through Malawi as the company develops coal mines on Mozambique's massive unexploited reserves. Officials reported that 18 million tons of Mozambican coal will be transported annually. In addition to the coal tonnage, Malawi will benefit from the 5 million tons of general cargo railed annually.

Mia said that Malawi will save more than $120 million annually in transportation costs, which would reduce transport costs to and from the country about 40%. Malawi also will earn about $8 million annually in fees from the concession.

The travel time between the port of Nacala and Limbe will now be 38 hours, if travelling at a speed between 50 and 70 kilometers an hour. Currently, the trip takes 5 to 7 days, travelling at a speed of 15 to 20 kilometers an hour.

Vale is also investing $3.4 billion to construct a rail link from the Moatize mine in northwest Mozambique to Malawi's network and upgrade lines into Mozambique to Nacala port over a distance of 912 kilometers. For related information, see August 12, 2011, article - Vale Moves on $12 Billion African Project Pipeline Through 2016.

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