Coal India Limited to Withdraw from Mozambique Coal Joint Venture

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--State-owned Coal India Limited (BSE:533278) (CIL) (Kolkata, India) plans to withdraw from joint venture (JV) International Coal Ventures Limited (ICVL). In 2014, ICVL acquired Rio Tinto's (NYSE:RIO) (London, England) Mozambican coal assets for $50 million, after Rio Tinto invested $4 billion.

For related information, see August 4, 2014, article - Once Valued at $4 Billion, Mozambique Coal Assets to Be Sold by Rio Tinto for $50 Million.

CIL, which owns 28% of ICVL, informed the Bombay Stock Exchange last week about the withdrawal decision. ICVL is a JV between five India-based companies: CIL, Steel Authority of India (BSE:500113) (New Delhi, India), Rashtriya Ispat Nigam (Visakhapatnam, India), National Thermal Power Company (BSE:523555) (NTPC) (New Delhi) and NMDC (BSE:52637). The JV was set up to acquire coal assets abroad to guarantee secure supplies of coking coal for the Indian Steel Industry.

The Mozambique assets consist of stake in the Benga opencast coal mine in the Moatize district, and the Zambeze and Tete East coal projects, all in the western province of Tete, and holding 2.6 billion tonnes of coal reserves.

The other stakeholder in the Benga mine is Tata Steel (BSE:5004700) (Mumbai), which, according to unconfirmed reports, has decided not to invest any further in the mine.

ICVL is planning to invest $2 billion in Mozambique's coal sector and holds concessions to two further blocks in the Moatize coal basin, but a report claims that a senior executive has said that the quality of the coal is poor and could not be used to fire power stations. There also have been reports of differences and discord among the JV partners.

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