The Telegraph
Sunday , April 20 , 2014
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CIL project in Africa faces delay

Calcutta, April 19: Coal India’s exploration plans in Mozambique is moving at a slow pace because of procedural delays and inadequate infrastructure.

The company may miss its expected commissioning date in 2016 for this overseas venture. Its prospecting licence for coal blocks in the south east African country is valid till August this year.

CIL will soon approach the government of Mozambique to renew the licence.

Over the last one-year, global coal prices have softened by around 10-15 per cent across different regions. According to market observers, this trend is likely to continue.

Rising stock in exporting countries such as Australia, Colombia and South Africa, combined with weakening demand, primarily in the emerging markets, have led to lower prices of coal.

Company sources said Coal India was taking a cautious approach because of the market conditions.

Anglo-Australian miner Rio Tinto had to write down its Mozambique assets because of transportation constraints and lower recoverable coal estimates.

Though delayed, Coal India, however, remains hopeful about the project.

“The project is alive and at the moment the analysis reports based on drilling are being prepared,” a senior Coal India official told The Telegraph.

A final project report could take around two to three years to be prepared.

“Our existing prospecting licence (for five years) is set to expire. We would be approaching the government of Mozambique for a renewal. At the moment we are undertaking 40,000 metres of drilling in two phases and another phase of drilling is due,” the official said.

Coal India, through its wholly owned subsidiary Coal India Africana Limitada (CIAL), had secured the licence to look for coal resources in Mozambique back in 2009.

CIAL set up its office in Mozambique in February 2012 and obtained an environmental clearance for exploratory drilling in July 2012.

Apart from a capital outlay of Rs 25,400 crore, Coal India has earmarked an ad hoc provision of Rs 35,000 crore in the 12th five-year plan for development of coal blocks in Mozambique and acquisition of coal assets abroad.

The miner had been allocating Rs 4,000-5,000 crore every year as a part of this exercise.

While progress on Mozambique blocks had been slow, Coal India’s effort for overseas acquisitions are yet to yield results.

The miner had reportedly been in discussion with Australian miner Peabody Energy’s Wilkie Creek mine and US-based Massey Energy Co’s Sidney mines.

Coal India had also considered buying stake in Indonesia’s PT Golden Energy Mines Tbkp, but lost the deal because of delay by the government.