Construction to Start on Thermal Power Plant at Vale's Moatize Coal Mining Complex in Mozambique Next Year

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Researched by Industrial Info Resources (Sugar Land, Texas)--Brazilian miner Vale SA (NYSE:VALE) (Rio de Janeiro) plans to start construction of a 1,800-megawatt (MW) thermal power plant at the company's Moatize coal-mining complex in Mozambique in March 2010. The first section of the coal-fired power plant, which will have a capacity of 600 MW, is expected to come online in December 2012.

The $1.3 billion coal-mining complex dates back to 2004, when Vale won the concession to undertake a feasibility study of the project. The cornerstone for the complex was laid in March of this year, and the complex is expected to export 11 million tons of coal each year from the previously unexploited coal basin in the Tete region of Mozambique. The coal basin contains an estimated 838 million tons of high quality metallurgical coal, used in the steel-making process.

Vale expects to export 8.5 million tons annually of metallurgical coal and 2.5 million tons of thermal coal from the complex, which has an expected start date in the first half of 2011. Some 3 million tons of the thermal coal produced will be used by the power plant at the complex, while the metallurgical coal and the remainder of the thermal coal will be shipped 600 kilometers by rail to the port of Beira. From there, the coal will be exported to Brazil, Europe, Asia and the Middle East.

The rail link to Beira was destroyed in the civil war in 1983, and Mozambique has already received $104.5 million from the World Bank towards the rebuilding of the line. In May 2009 the government signed a loan agreement with the European Investment Bank (EIB) for a further $58 million to help with the rail refurbishment. Another loan from the EIB for $32 million will be used to dredge the 27-kilometer channel, as well as the quays and maneuvering areas at the Beira port, to enable ships of up to 60,000 tons capacity to use the port.

Although Vale expects to export up to 11 million tons of coal using the rail line and port facilities, the company is not alone in undertaking mining operations in the Tete region. The Australian company Riversdale Mining Limited (ASX:RIV) (Sydney) also holds coal-mining licenses in the region and hopes to use the rail line and port facilities. However, with the expected carrying capacity of the upgraded rail link amounting to just 12 million tons annually, alternative transport systems will be required. One possible solution under investigation is to use barges to float coal down the Zambezi River and construct a new rail system across Malawi to link with Mozambique's northern rail system and the port of Nacala.

Vale, which has already invested about $280 million to date in the project, is also keenly aware of the company's social obligations to the local community - so much so that approximately $7 million has been invested in social projects, such as the construction of three orphanage units at the Moatize Health Center, construction of the Moatize Geology and Mines Intermediate Center and the establishment of the Tete Provincial Hospital.

Of the 2,000 employees at the project site, about 90% are from Mozambique. This number is expected to rise to a maximum of 4,000 during the construction of the project. Vale has installed a professional training program, intended to instruct local workers on industrial related and mining activities, with some 160 workers attending the program this year and an expected total of 340 by the end of 2010.

The project plan will include an educational center with classrooms, a conference hall and laboratories. In addition, two specialized schools, known as "Estação Conhecimento," or "Knowledge Stations," will be established to create partnerships with local communities and government in order to disseminate information on agricultural techniques to improve productivity. Mozambique is one of the poorest countries in Africa and has a largely agrarian economy in spite of the country's large mineral reserves. The Moatize complex has the potential to lift Mozambique to the status of Africa's second-largest coal producer after South Africa.

To further underline Vale's commitment to the health and safety of the local workforce, the company has invested heavily in a simulator training package from the privately owned Immersive Technologies Pty Limited (Perth, Western Australia), which has offices in South Africa, Australia, the U.S. and Chile. The package, which includes a custom mine site that replicates the Moatize mine, will support the Caterpillar 992G wheel loader, the Caterpillar 793D haul truck and the Hitachi EXX5500 shovel/excavator types of equipment that will be used at the mine.

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