DESPITE possessing some of the richest natural resource deposits in the world, great swaths of Africa remain an industrial backwater. Volatile political regimes which replaced decades of colonialism lumbered many countries with a culture of instability leading international businesses to consider investments as too risky.
But this is changing. With an increasingly business-friendly climate emerging in some African countries, and substantial demand for natural resources from Brazil, India and China in particular, mining companies are racing to get their share of this natural resource bonanza.
This is certainly the case in the Moatize region of Mozambique where coal deposits are so rich that in some areas it can be found on the surface. The region is estimated to have reserves to rival Australia's Bowen Basin, and is predicted to provide 25% of the world's coking coal by 2025.
The Moatize is inevitably on the radar of the world's mining giants with 40 separate companies now holding contracts across Tete province. However, the main problem for these companies is not extracting the material but getting it out of the country. The sheer volume of coal is too great to transport it by road and although many of the country's railways have been improved after the ravages of a 16-year civil war which ended in 1992, they are not up to the task at hand.
The existing primary rail artery, the Sena line, which runs 575km from the heart of Tete province to the port of Beira is currently only capable of handling 2 million tonnes of coal per year.
However, a substantial improvement scheme is underway. Mozambique Ports and Railway (CFM) said in June that it expects to complete a long-awaited rehabilitation of the line in November which will increase capacity to 6.5 million tonnes of coal per year. A further expansion will then take place which is projected to up capacity to 12 million tonnes by the end of 2013 and 20 million tonnes by 2016.
CFM stepped in to complete the upgrade after Mozambique's government cancelled a contract with India's Rites and Ircon which was due to complete work in September 2009. Brazilian mining giant Vale began using the line in September last year, and is hoping to move up to 4.5 million tonnes by the end of the year. And with other mining companies which have been forced to use trucks up to now keen to follow suit, coal production is likely to further boost Mozambique's economy which grew by 7.2% in the first six months of 2012.
"Our production is still constrained by the limited capacity at the Beira port and the Sena railway line," Mr Ricardo Saad, a director at Vale Mozambique said in August. "We have a lot of production capacity at the mine and we hope that when the refurbishment of the Sena line is complete, we can begin to accelerate our production capacity."
Vale though is not restricting its output to one line. With work underway on a coal processing unit capable of extracting 26 million tonnes per year, which will be one of the world's largest when it is built, the company is investing a reported $US 4.5bn in a railway and port project, $US 691m of which it is spending this year.
In June the Mozambique government approved a lease to Northern Integrated Logistics Corridor (Clin), which is 80% owned by Vale and 20% by CFM, for the Mozambique sections of the new line from the Moatize coal basin to Nacala on the northern Mozambique coast. Clin will provide $US 1.5bn of the cost of the new 1067mm-gauge line which will be 912km long and will serve a new dedicated coal terminal at Nacala-a-Velha adjacent to the existing Nacala port, in effect establishing a second deep water port at Nacala. The port is generally regarded as the best deep-water harbour on the east African coast and unlike Beira, does not require dredging. Vale's new terminal will also be capable of handling far more than Beira's annual capacity of 12 million tonnes.
Two new stretches of railway will be built comprising a new line in Malawi, and a short section from Mossuril to Ponta Mamuaxi within Nacala. Rehabilitation work will also take place on the existing route from the Malawi border to Mossuril, which is operated by Mozambique's Northern Corridor Development Company (SDCN) which is 51% held by Vale.
In order to achieve a direct route from Moatize to the north, a section of the line will run through neighbouring Malawi. Vale signed a memorandum of understanding with the Malawian government in December 2011 that will allow it to build a new line and share and upgrade existing railway infrastructure. The new line will run 210km from the existing line in Moatize via Chikwawa to Nkaya Junction where it will meet the Malawi - Nacala line. Rehabilitation of the 98.6km line from Nkaya to Nayuci on the border with the Mozambique province of Niassa will also take place. This section is operated by Central East African Railways (Cear) in which SDCN holds a 51% stake.
Work is set to start on the railway before the end of this year and will be completed by 2015. The line will have sufficient capacity to carry 40 million tonnes of coal per year, 30 million of which will be available to Vale, and 10 million-worth available for use by other mining operators, or for passenger services.
Other mining companies already active in Mozambique include Rio Tinto which completed a $US 4bn acquisition of the domestic Riversdale mining company last year and is carrying out a feasibility study of building its own railway infrastructure. The company signed an agreement with fellow Moatize mining license holders Ncondezi and Revuboe in January which would permit access to its new greenfield rail and port project known as the Integrated Transport Development project (ITD).
Early indications are that ITD could potentially have annual capacity of between 25 and 100 million tonnes and will offer the shortest distance, and potentially lowest cost, of transporting coal from Tete to another new port facility that will be located north of the Zambezi River. Ncondezi is considering using either or both of the Sena and Vale's Nacala line to initially export coal from its estimated 4.5 billion tonnes of reserves. The agreement with Rio Tinto will allow it to export 10 million tonnes on the new route with no commitment to finance the line. Further details of the ITD project will be announced by the end of the year.
Kazakhstan-based Eurasian Natural Resources Corporation (ENRC) is another mining company joining the rush to the Moatize's coal, and the latest to announce plans to build a railway. ENRC is planning to build a standard-gauge line from Chiúta in Tete province to Nacala which will be designed to handle 60 million tonnes of coal per year when it is completed in 2015.
ENRC has so far not mined any coal at all in Tete, but expects annual production to reach 30-40 million tonnes by 2020. It has 12 exploration licenses in the province, and is currently working on one at Estima. The Estima project is expected to produce 20 million tonnes of coal a year by 2015-16.
The ENRC railway, for which the mining group will arrange finance, will avoid Malawi, running entirely through Mozambique. ENRC will develop port facilities at Nacala close to Vale's, and is expecting an initial capacity of 40 million tonnes of coal a year, which could later rise to 60 million tonnes. A further expansion to 100 million tonnes is possible.
In developing its plans for the railway ENRC has worked closely with Mott MacDonald which began studying prospective routes in 2008, before ENRC acquired Central African Mining Exploration Company (Camec) in 2009 establishing its mining interests in Africa.
Mott MacDonald conducted a cost analysis of transporting coal and considered a range of concepts including barging coal down the Zambesi River to the Indian Ocean and an alternative route through Malawi to the coast subsequently adopted by Vale. It eventually settled on a 1137km route in Mozambique from Chiúta to Nacala.
The provisional design includes alignment, structures, and port infrastructure and calls for a single-track line with 21 passing loops typically every 50-70km with a minimum loop-length of 6km. Heavy-duty, 68kg/m track will be laid in order to accommodate 32-tonne axleloads. And with ENRC's mining licence existing on the southern side of the Zambesi River, and the railway running on the northern side, a 40km-long conveyer-belt system will be built to carry the coal over the river near Cahora Bassa to the railhead at Chiúta.
Hilly topography is set to be a major challenge to construction along with the formidable Shire River. The study anticipates that approximately 52km of bridges and viaducts will be built including an 8km viaduct over the Shire. However, the route will not require any tunnelling.
Geo-technical investigations are due to be completed by the end of this year, while road access and construction camps will be established in 2013. Preparatory work will then follow ahead of track laying. Mott MacDonald will also oversee construction post-design with two vast Engineering Procurement and Construction (EPC) contracts required along with an operating contract.
After the debacle of rail concessioning in Mozambique, compounded by the turbulent history of concessions in Kenya, Uganda and Tanzania, the ENRC rail corridor will be established as a build, operate and transfer arrangement. The new railway will be open for use by all players in the Moatize basin, and at the insistence of the government, passenger services will be added. Trains of 300 wagon are envisaged to serve the line with a frequency of between 27-36 per week per direction, with 24-hour operation.
Mott MacDonald says that the line will be 1435mm-gauge to achieve a wagon capacity of 110 tonnes, give access to a greater range of rolling stock options from global suppliers for the fleet of 3500 wagons and 100 diesel locomotives required, and support the much-publicised long-term desire of the Southern African Development Countries, including Mozambique, to move to standard gauge.
The Mozambique government is demanding that a certain percentage of local labour is involved in the project to distribute wealth into areas impacted by construction. At the peak of the construction phase 15,000 people are anticipated to be involved laying up to 4km of track per day.
Whether this will equate to long-term benefits for the country remains to be seen. Both Vale and Rio Tinto have been heavily criticised for their treatment of local communities when developing their mining enterprises following relocations. And with less stringent regulations than the developed world, their environmental practices on African projects have also been brought into question.
Tete certainly has the potential to do great things for Mozambique and help the country leave the shadow of its civil war once and for all. The government is reportedly exploring the possibility of securing Chinese finance to back its own port and railway project to link the Moatize to Nacala, again reflecting the importance of this to the future of the country. But to realise this potential, strong and secure leadership is required at the very top to build on encouraging early economic growth that will benefit not only western mining companies but Mozambique's people and society as a whole.