The Sena railway, which transports coal mined in Mozambique’s Tete province to the port of Beira, has been at a standstill since last week due to damage caused by flooding, according to the Mozambican press.
The situation is making officials at the subsidiaries of Brazilian company Vale and Anglo-Australian group Rio Tinto operating in the province “nervous” and as well as the rain there was a derailment last Tuesday.
Losses resulting from accidents, from three derailments this year alone, ad natural disasters have already affected accounts and the companies’ commitments to their sales contracts, particularly to the Indian and Chinese markets.
Until December of last year the Brazilian mining company transported over 2 million tons of coal along the Sena railroad on 1,000 trains, whilst Rio Tinto transported 35,000 tons of coal.
According to the Mozambican press officials from the Vale group are currently in Mozambique to #$%$ the situation and the lack of infrastructure and inefficiency of the Sena line and plan to “deal with this at the highest level soon.”
As well as the 10 kilometres of railroad destroyed due to last week’s derailment, rains in Mozambique have led to huge losses on the line and in some places the water has washed away the rails, sleeper and ballast and even destroyed some small bridges.
The Sena railroad has been under repair since last May, which is expected to cost US$45 million.
Vale announced that it has declared force majeure on a number of its coal sales contracts on February 15th 2013.
It said “We are communicating with customers as required under our agreements with them.”
Vale said “High rainfall since early February 2013 and continuing over the last few days in Tete, Mozambique, has created serious challenges to the Linha do Sena railway, thus impacting the transportation of our coal products. So far, we estimate a loss of approximately 250,000 tonnes in metallurgical coal shipments.”
Caminhos de Ferro Moçambique, owner of Serra-Beira railway, is taking all the necessary measures to restore the railway traffic and the situation is expected to be normalized by the end of this month.
Rio Tinto declares force majeure at Benga mine. If they owned ANR they would not have to worry about this. When will they learn. Guess RIO needs their mongolia copper mine to blow up in their face before they wake up and smell the Alpha . Now that`s a Blend worth owning.
Tue Feb 19, 2013 7:43am EST
* Sena line only coal export route for Vale, Rio Tinto
* Vale declared force majeure on coal shipments
* Not possible to reopen this week - CFM
MAPUTO, Feb 19 (Reuters) - A railway line that is Mozambique's only available coal export route for mining giants Vale and Rio Tinto will remain shut at least until next week after heavy rains.
The line has been shut since Feb. 12 after heavy flooding along its tracks, forcing Vale to declare force majeure on a number of coal shipment contracts.
"It is not possible," said Alves Cumbe, spokesman for state-owned ports and railways group CFM, when asked whether the railway line would open this week.
"There are still intense rains and the river continues to flood. We cannot intervene at the moment."
Rio Tinto said it was monitoring the situation.
The shutdown is a further blow to companies already battling with major infrastructure bottlenecks in the former Portuguese colony, home to vast reserves of coking coal used in steel making.
The Sena line, which connects the northern Tete province with the coast, is currently the only available railway that mining companies can use to get their product to port.
Apart from the line, some companies are moving coal by trucks, although this method has not proven economically viable.
Vale expects to lose 250,000 tonnes of coal shipments due to the shutdown, but said the situation should be normalized by the end of the month.
The Brazilian mining giant was already forced to curtail its Mozambican output and export targets last year. Rio Tinto wrote down $3 billion on its Mozambican assets, partially due to infrastructure constraints.
Apart from an upgrade to the Sena line, Mozambique plans four new rail and port projects that together could raise the annual coal export capacity from Tete to more than 120 million tonnes, but these projects will likely take more than a decade to complete.
Earth to Vale,Anglo,Rio and BHP. ANR is the place to be not Colombia and Mozambique or Australia. When are you people going to get smart ? 4.7 to 5.2 billion tons of reserves and you keep throwing money away. Wake up and smell the coffee. You need a ace in the hole and it is ANR.
Got problems in Australia back fill from ANR. Got problems in Colombia back fill from ANR. Got problems from Mozambique back fill from ANR. Need a big source of Met and thermal look no where else but ANR. They have the biggest export capacity and with all the ports that capacity could be doubled .
Once you buy ANR you can buy CNX coal divsion. They don`t want to be in coal anymore. Once that happens the CNX gas divsion will be bought by a major oil company. We will then see other M&A in coal companies.
To make matters worse in mosambique the government will not allow coal to be barged out. Not because of environmental concerns. Because the the river is non navigational.
What's more, the coal is of much poorer quality than first thought. A lot of burnt coal and coal with high clay content.
Hey Ben. Do you have any feeling as to why nobody is buying out ANR right now? I just don't get it. It is getting its financial in order and they have much to offer any other company in this industry at very beaten down prices. Is there something holding them back or are they all looking to get out of coal at this point? Is the US blocking foreign takeover? I just don't get it. Now would be an ideal time to take ANR over.