Maputo — The Mozambican government on Tuesday approved two new coal mining concessions, each to last for 25 years, in Moatize district, in the western province of Tete.
Briefing reporters after a meeting of the Council of Ministers (Cabinet), the Deputy Minister of Mineral Resources, Abdul Razak, said the two contracts will be made public once they have been approved by the Administrative Tribunal.
One of the concessions was granted to the Indian company Midwest Africa, covering an area of 15,840 hectares about 50 kilometres from Tete city. Razak said the viability study on this area showed reserves of about 480 million tonnes of coal. Of this, 363 million tonnes is coking coal, and the rest thermal coal.
Total investment in this concession is estimated at over 1.4 billion US dollars. Coal production is expected to begin in 2019, with annual production of a million tonnes of coking coal and six million tonnes of thermal coal.
Razak said the mine should employ 1,320 workers in the production phase, and will pay the state some 35 million dollars in tax per year. The Mozambican state, represented by the Mozambican Mining Exploration Company (EMEM), will have a holding of five per cent in the mine.
The second concession was granted to Rio Tinto-Mozambique, the local subsidiary of the Anglo-Australian Rio Tinto group.
This concession is known as the “Zambeze Project”, and is just ten kilometres outside Tete city, covering an area of 9,700 hectares.
Rio Tinto expects to invest 3.3 billion dollars in this concession area. During the production phase, which should begin between 2023 and 2025, the mine should produce seven million tonnes of coking coal and five million tonnes of thermal coal a year. It will employ 1,400 workers.
This is Rio Tinto's second concession in Tete. The first is at Benga, also in Moatize district, where a giant open cast coal mine is already in production.
Under their contractual obligations, both Midwest Africa and Rio Tinto must sell five per cent of the shares in the new mines to Mozambican nationals through the Mozambique Stock Exchange.
As for the tax benefits that these mining companies will enjoy, Razak said these are restricted to exemptions from customs duties and Value Added Tax (VAT) in the first five years of the projects, under the mining legislation of 2007 which drastically reduced the scope of fiscal incentives.
The contribution of mining companies to the state budget since 2007 has been much higher than previously, said Razak.
“Even so, if we want the country to be attractive for investment we have to look at the regimes practiced in the region, such as in Zimbabwe, South Africa and Botswana, which in some cases are more beneficial”, he added, “We want to gain more benefits, but we also want to be competitive, and that is the perspective in which we are working”.