Riversdale Mining, Tata Steel to Invest $270 Million in Mozambique's Benga Coal Mine Project

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Researched by Industrial Info Resources (Sugar Land, Texas)--Australian mining company Riversdale Mining Limited (ASX:RIV) (Sydney, Australia) and Indian steel major Tata Steel Limited (BSE:500470) (Mumbai) have announced plans to invest $270 million in Phase I development of the Benga coal mine in Mozambique. Phase I of this project is expected to yield 300,000 tons per year of thermal coal, which will be utilized for power generation, and 1.7 million tons per year of coking coal, which will be used in steel production.

The project has received approvals for construction of the first stage. Construction is expected to begin by the end of this year, subsequent to grant of environmental clearances. Initial production is expected to begin with a supply of coking coal by 2011. Tata Steel holds a 35% stake in the project, while Riversdale Mining holds the 65%balance stake.

Riversdale Mining has earmarked cash reserves of $245.8 million to fund its share in Phase I of the Benga coal project. Phase II of the project is likely to be completed by 2014 and will increase production capacity of the mine to 2 million tons per year of thermal coal and 3.3 million tons per year of coking coal. According to reports, Riversdale Mining also will build a 500-megawatt (MW), mine-mouth, coal-powered plant in association with Elgas SARL (Maputo, Mozambique). The power plant is scheduled to commence operations in 2013, and will be augmented to 2,000 MW of generation capacity at a later stage.

In 2007, Tata Steel signed a joint venture agreement with Riversdale Mining and acquired a 35% stake in the latter's coal projects in Mozambique for $88.2 million. The venture's assets cover an area of 24,960 hectares. Riversdale Mining owns about 290,000 hectares of land in Mozambique. According to the agreement, 40% of coking coal from the project will be supplied to Tata Steel's production facilities in Asia and Europe.

Following initial mining estimate studies conducted in 2007, Riversdale Mining indicated that the Benga mines had inferred coal resources of about 1.225 billion tons, of which 720 million tons were recoverable using open-cut mining techniques. In April this year, this estimate was revised to 4 billion tons of inferred reserves, which included 1.03 billion tons of indicative reserves. Reports stated that about 893.4 million tons of the indicative reserves could be extracted at ground depths of less than 500 meters.

Riversdale Mining, which is also exploring the Zambeze coal mines in the Moatize Basin of Mozambique, recently announced that the mine was found to hold estimated reserves of about 1.7 billion tons. The estimate was arrived at subsequent to drilling operations conducted during 12 months, across 40,000 meters of land. The Zambeze coal mine is near the Benga coal project.

Tata Steel is one of India's largest private-sector integrated steel producers. The company, which employs about 80,000 people in 26 countries, produces about 30 million tons per year of steel. Tata Steel and state-run NMDC Limited (BSE:526371) (Hyderabad, Andhra Pradesh) are reported to be in the process of setting up a 74:26 venture to acquire, develop and operate global mining assets. Tata Steel and other steel producers in India are looking at procuring mining assets to strengthen and stabilize a supply of raw materials. India's steel production is projected to grow to 120 million tons by 2015. NMDC has announced plans to set up a 1.1 million-ton-per-year steel plant in Orissa.

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