Final exploration of Coal India's Mozambique blocks to start in FY15

Miner to award drilling contracts in March

Kolkata-based Coal India Ltd (CIL), the world’s largest coal miner, will begin the third and final round of exploration in two of its blocks in Mozambique in early FY15. This brings it a step closer to commissioning mining in its maiden project abroad by 2016.

“The second phase of exploration, which is currently on, has seen minor delays owing to the onset of monsoon in that nation. That made the site inaccessible for some time. We will definitely award drilling contracts for the third phase in the coming March, after which the exploration work will start,” said a senior CIL official.

Of the overall 30,000 metres of drilling in the ongoing phase, the company has completed 17,000 metres. The miner was allocated two blocks with reserves exceeding a billion tonne in a government-to-government deal in Maotize in Tete province in the African nation in 2009.

The idea is to import the entire quantity of coal available in the two blocks to India to bridge the gap in demand and supply, which currently stands at over 135 million tonnes (mt) for domestic industries. However, CIL has already missed the original deadline of starting production by 2013.

The progress on the project has been slow owing to procedural delays in outsourcing drilling contracts and the inter-governmental differences over the pattern of funding apart from the lack of local infrastructure support, including roads and ports.

The official said the company hopes by the time mining begins in 2016, Mozambique government builds infrastructure for evacuation.

“The Mozambique government is building infrastructure. Also, we expect a railway carrying capacity of six mt annually to be free next year after the work of another mining firm, which is currently working there closes,” said the executive.

Apart from infrastructure issues, the extent and mode of local expenditure has been a bone of contention between the Indian and the Mozambique governments and a major irritant stalling progress of the project.

CIL has been allocating Rs 6,000 crore annually over the past few years for overseas investments, but has failed repeatedly in its acquisition plans.

The miner had earlier shortlisted Australian miner Peabody Energy’s Wilkie Creek mine and US-based Massey Energy Co’s Sidney mines but failed. It had also considered buying stake in Indonesia’s PT Golden Energy Mines Tbkp, but lost the deal owing to bureaucratic hurdles.