New Bidding Round to Open for Coal Riches in Mozambique's Tete Province

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--Mozambique's coal production is forecast to see an exponential rise over the next decade from 40 million tons per year through 2017 to 100 million tons per year by 2022. This will see it become a major player in the global league of coal exporters. With billions of tons of estimated coal reserves it has some of the world's largest reserves of the much sought after coking coal prized by steelmakers.

In 2012 a bidding round for new coal prospecting and mining licenses in Tete province will be launched, the deputy director of mines Geraldo Valoi said. Vale SA (NYSE:VALE) (Rio de Janeiro, Brazil) and Rio Tinto (NYSE:RIO) (London, United Kingdom) have already started coal production in the province.

An international bidding process will be conducted for the restricted area inTete. Applications for other minerals and coal resources outside Tete will be accepted in the usual online system from the end of April, after a three month pause used to upgrade the system, said Valoi.

The bidding process will ensure that a company with the right credentials and development plan was chosen, added Valoi. "Otherwise you will end up with speculators that get the license because they were first in the system, but who only plan to re-sell that license," he said.

Of the 1,600 prospecting and mining licenses in the system, 50% were for coal. Many of these had to be revoked from a previous total of 5,000, after miners gave up on projects or failed to deliver on their development plans. Changes to the mining law are intended to streamline procedures rather than present new obstacles.

The mineral and finance ministries were developing guidelines on how to tax mining deals when one company sold its stake or was acquired by another company. The new proposals should be passed in the first half of 2012, said Valoi. Studies were under way to see if the new tax regime could be applied retrospectively, he added.

For related information see August 12, 2011, article - Vale Moves on $12 Billion Project Pipeline through 2016 and February 27, 2012, article - Japan on Track with Projects in International Rush for Mozambique's Resources.

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