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Wednesday November 22nd 2017

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China to invest in Mozambique coal


China has deepened its interest in Mozambique’s natural resources, agreeing to invest $1bn in a coal project.

Wuhan Iron and Steel, one of China’s biggest steel producers, will spend $200m (€163m, £134m) on an 8 per cent share of Riversdale, a listed Australian company developing coalfields in Mozambique’s Tete province. Wuhan will commit an additional $800m to the Zambeze coal reserve.

The deal extends the interest of big emerging market steel producers in Riversdale. India’s Tata Steel already owns a 22 per cent stake in Riversdale and Brazil’s CSN has 16 per cent of the company.

Riversdale’s coal reserves in the two concessions areas of Benga and Zambeze come to more than 13bn tonnes and count among the world’s largest untapped reserves of coking and thermal coal. Coking coal is used to make steel, while power plants provide a market for thermal coal.

Vale, the Brazilian company and the world’s largest iron ore miner, is the other big name in Tete and it expects to start extracting coal from a giant open cast pit later this year.

It had been expected that Riversdale and Vale would sell some coal to China on long-term contracts, but Wuhan’s investment marks the first time that Chinese investment is being channelled directly into coal production.

“The Chinese have been scouting around for coal in the region,” said Martyn Davies, chief executive of Frontier Advisory, a consultancy. “China really lacks supplies of good quality coking coal.”
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