Maputo — The Mozambican government on Tuesday approved the lease to the newly formed company CLIN (Northern Integrated Logistical Corridor) of a new railway which is to be built between the Moatize coal basin and the northern Mozambican coast.

The Brazilian mining giant Vale owns 80 per cent of CLIN, while the remaining 20 per cent is in the hands of Mozambique's publicly owned ports and rail company, CFM.

The lease covers everything new that is to be built to ensure the export of coal form Vale's open cast mine in Moatize. There are two entirely new stretches of line within Mozambique - from Moatize to Malawi, and from Mossuril to Ponta Mamuaxi. Mossuril is on the existing northern line from Malawi to the port of Nacala, while Ponta Mamuaxi is on the western side of Nacala bay, opposite the existing port of Nacala.

The government also approved a lease to CLIN of the projected coal terminal at Nacala-a-Velha. This is not part of the existing port. In effect, this means that Nacala bay will have two deep water ports, one of which will be dedicated exclusively to coal exports.

Announcing the decision, after a meeting of the Council of Ministers (Cabinet), the official government spokesperson, Deputy Justice Minister Alberto Nkutumula, said that the total cost of the new terminal and the two new stretches of railway will be about 1.5 billion US dollars. Construction will take three years and will start before the end of 2012.

After the work is complete, "opportunities will be opened for Mozambican companies and citizens to acquire five per cent of the CLIN capital", said Nkutumula. Later, CFM will gradually increase its holding in CLIN up to a maximum of 50 per cent.

Nkutumula said the new railways will be able to move 40 million tonnes a year - about 30 million tonnes of coal from the Vale mine, while the rest "could be coal mined by other companies, or simply the transport of people and goods".

Asked whether Malawi would join the CLIN shareholding structure, Nkutumula ruled this out. The Moatize-Nacala railway will run through Malawian territory, "but the part of the line that runs through Malawi is negotiated directly between the investor, Vale, and the Malawian government. The Mozambican government only authorizes the part built inside Mozambique".

Given the scale of the investment, Nkutumula was sure that Vale had already negotiated with Malawi. "This is an investment of 1.5 billion dollars", he stressed. "So I don't think Vale could advance without the certainty that it will be possible to build the railway in Malawi".

In fact, Vale signed a rail concession contract with the Malawian government in December 2011. The new line will run from Chikwawa in the far south of Malawi for 137 kilometres to Nkaya Junction, where it will meet the Malawi-Nacala line.

To complete the railway will require rehabilitating the existing line from Nkaya to Nayuci on the border with the Mozambican province of Niassa. This line is currently operated by Central East African Railways (CEAR). Vale owns 51 per cent of the shares of Mozambique's Northern Corridor Development Company (SDCN), which in turn owns 51 per cent of CEAR.

The railway to Nacala-a-Velha will also require upgrading of the line from the Malawian border to Mossuril, which is operated by SDCN.

The new railway is seen as crucial to Mozambican coal exports, since the only railway that is currently carrying coal, the Sena line from Moatize to Beira, has a maximum capacity of six million tonnes a year. Even the projected improvements to the Sena line will only bring its capacity up to 12 million tonnes a year.