Calcutta, May 6: Mozambique has awarded a contract to Tata Steel and its joint venture partner Riversdale for mining at the Benga coal project.

Australia’s Riversdale Mining will gradually develop a hard coking and thermal coal mine at Benga in the Moatize area, which could yield 20 million tonnes annually, at an estimated investment of more than $800 million.

Production is set to begin in 2010, and Tata Steel plans to source coking coal for its Anglo-Dutch subsidiary Corus.

The development comes close on the heels of Tata Steel acquiring a 15 per cent stake in Riversdale, listed on the Australian Securities Exchange.

The Indian conglomerate also holds a 35 per cent stake in the Benga project. Moreover, it has the first right to pick up 40 per cent of production.

The terms of the contract have received approval from the council of ministers of the government of Mozambique ,and Riversdale Mining has received a decree signed by Prime Minister Luísa Dias Diogo.

The decree approves the mining contract and its terms and conditions, and delegates authority to the minister of mineral resources to execute and implement the deal.

The contract covers all aspects of the proposed development, including exploration, feasibility, development, operations, fiscal regime, rehabilitation and final mine closure requirements.

The terms and conditions of the contract will be incorporated into the Benga project feasibility study, due for completion in the current quarter.

The study will take into account the reduced cost of operations, a consequence of the impact of the global recession on mining.

S&P rating

S&P said today it had kept its “BB” issue rating on the £3.67bn senior secured debt of Tata Steel UK Ltd. on credit watch with negative implications.