Mozambique trying to ease coal companies’ pain, but no tax breaks – by Pascal Fletcher (Reuters Africa – July 21, 2014)

MAPUTO (Reuters) – Mozambique is discussing with its foreign coal mining partners ways to help them ride out depressed markets but will not be offering special tax breaks to ease the pain, its mineral resources minister said on Monday.

Esperanca Bias told Reuters the government understood that companies such as Vale of Brazil and Rio Tinto, which helped Mozambique to start up in 2011 as a coal producer and exporter, were feeling the pain of depressed global prices for coal used in steelmaking and generating power.

The southern African nation, which still bears the scars of a 1975-1992 civil war, has the world’s fourth-largest untapped recoverable coal reserves, estimated at over two billion tonnes.

Vale is investing billions of dollars on rail and port networks to bring greater volumes of coal to the market, up from a current export capacity of five million tonnes per year. It is targeting 22 million tonnes by 2017/2018.

But Vale, which announced an accumulated loss of $44 million for Mozambique operations in the first quarter, says it urgently needs to cut operating costs to remain competitive.

“We’re studying this,” Bias said on the sidelines of the 5th Mozambique Coal Conference in Maputo. “We are working on it to see what can be done from our side.” she added.

Mining companies face the challenge of getting coal, mostly from mines in Tete province, over 600-900 km (370-560 miles) to ports on the Indian Ocean coast. This is in a nation that urgently needs modern railways and ports.

Comparatively, major coal producer Australia has to carry its coal only about 200 km to ports which give access to the same big overseas export markets of China and India, putting the fledgling southern African producer at a costs and logistics disadvantage.

Bias said that although the government was looking at ways to tackle the challenging logistics, this would not involve any special concessions.

“We don’t believe that reducing tax will resolve the problem. We don’t think the tax system needs to be changed,” she said.


Addressing the Maputo conference, the director of Vale’s Global Coal Division, Pedro Gutemberg, said the Brazilian company remained committed to Mozambique.

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