Coal Logistic Challenges in Mozambique

RSV ENCO Consulting (Pty) Ltd
20 Anderson Street, Johannesburg
P.O. Box 61511, Marshalltown, 2107,
South Africa
Tel: (+27) 11 498 6010
Fax: (+27) 11 498 6210
www.rsvenco.com
Coal Logistic Challenges in Mozambique
2nd Coal Transportation Annual Summit
20 May 2015

THE OF COMPANIES
Project Management and Design Capability Across the Full Project Lifecycle
A collective of Linked Enterprises providing end to end
solutions for Mining & Industrial clients
Concept Market

OUR ENGINEERING CAPABILITIES
Coal
Mining
• Geological
exploration
management
• Resource to
Reserve
• Competent Persons
Report
• Mine Design of
open pit, open cast
and underground
mines
• Shaft System
Design
• Pumping and
Piping Systems
• Financial Modeling
Energy
• IPP Interface
management
• Thermal Power
Generating Plants
management
• Balance of Plant
Engineering Design
• Energy efficiency &
optimisation
studies
Coal
Processing
Supporting
Infrastructure
• Metallurgical Test Work
Supervision
• Mass, Water & Energy
Balances
• Equipment Sizing,
Process Data Sheets
• Plant Audits and Plant
Optimization
• Problem solving / De-
bottle Necking /
Optimisation
• Dense Medium Separation
• CHPP Design
• Washability Simulations
• Flow Sheet Development
• Provincial Roads
• HV Power Supply &
distribution
• Rail link / Rapid Load-
out Systems
• Industrial Buildings &
Workshops
• Water Management
 Supply and Storage
Facilities
 Clean & Dirty Water
Separation
 Treatment solutions
• Mine Closure

1. Introduction
2. Geology
3. Mining
4. Coal Preparation
5. Logistics
5.1 Alternative solutions
5.2 Rail
5.3 Port
6. Infrastructure: Power supply
7. Legal and fiscal framework
8. Marketing
9. Cash Cost
10. The Future
11. Conclusion
Strategic Focus Areas for Africa
Infrastructure
Logistics
Skilled People
CONTENTS

STRATEGIC CORRIDORS
5
Trans-Kalahari

23 million people
2500km of
coastline
STRATEGIC CORRIDORS … continue

MULTIPLE COAL SEAMS – HIGHLY FAULTED

Coking Coal yield
19 – 23%
For a 10.5% ash
Thermal yield
(5400Kcal) 22 –
25%
COAL PROCESSING OF TETE COAL FIELDS
10.5% ash
5400kcal
Ave Yield
Primary Cyclone 36%
Secondary Cyclone 32%
Reflux 50%
Spiral (Thermal) 44%
Flotation Cells 68%
Coarse Coal 15-3mm
Small Coal 3 – 1mm 1mm- 0.25mm
15% of Feed to plant
120 t/hr
15% of Feed to plant
60 t/hr
0.25mm<
Average fines
about 36%

POSITIVES
• High CSN (8-9)
• Very High CSR (60-64)
• Low CRI (22 -24)
NEGATIVES
• High Sulphur ( >0.8%)
• High Phosphorous (> 0.055%)
• Lower Fluidity
COKING COAL PROPERTIES IN TETE
• Mozambique coke cell at a slight discount to HCC (± 8%)
• “Making Coke is a blending game and there are some natural advantages to
coke manufacturers sourcing Chipanga Coking Coal. It is Ideal for making
good quality coke” – Dr D Ojha from Global Coke, India
Notes:
CSN – Coke Strength Reactivity
CSR – Crucible Swelling Number
CRI – Coke Reactivity Index

Run of Mine 3.2 Mtpa
Saleable Products per
annum
588 000 tons of Coking Coal
627 000 tons per annum of export
Thermal (5400 Kcal)
On mine cash cost US$ 22 / saleable ton
Strip ratio 0.55 BCM: ton
FOB cash cost in Beira
(all-in)
US$110 /saleable ton
Capital US$ 22.9 mil for 2014
Life of Mine 15.4 years
PRODUCTION (Steady State)

64%
INDICATIVE MML PROCESS COST
US$ 110 / ton FOB Beira (3.2 Mtpa)

ALTERNATIVE LOGISTIC SOLUTIONS

Dredging Data:
• Approximately 180km (from the total 540km) will
require dredging
• Capital dredging estimated volume : 19 million m3
• Cost about $10 m-$12 /m3
• Maintenance dredging: 25% of capital dredging
per year
• Dredging will effect 7.1% to 11.7 % of the active
channel
• The Zambezi is a very dynamic river: main channel
is known to shift over time and the flood episodes
can quickly modify the position of the navigable
channel
• After capital dredging you will need permanent
maintenance dredging
BARGING DOWN OF THE ZAMBEZI
Delta environmentally
very sensitive

Features of a Proposed Coal Slurry Pipeline (ARUP)
• Use fresh water from Zambezi river or sea water from the ocean
• Closing loop system, minimise water loss.
• Particle size of at least 4 to 7 mm for fresh water transport and up to 50mm for seawater
(dense medium) transport.
• Pipeline slurry of 50 to 60% solid by weight.
• One main pump station and one booster pump station to overcome friction.
• Dual pipeline principle can be followed large pipeline for coal slurry, small pipe line for water
return 70% of water recycled.
• Capital Cost per km : US$ 9. 2 Million.
• Operational Cost: Assume 35 MW power.
Fixed Cost (pa) US$ 30 million
Variable Cost (per ton) US$ 0.5
• Expected Transportation tariff : US$ 20/ton
COAL SLURRY PIPELINE
Return recycled
water

NACALA LINE
23

Length: 912 Km
Capex: $ 4.4 Billion
$3.4 Billion Railway
$1.0 Billion Port Terminal
24
MOATIZE / NACALA RAIL LINE

Existing Line:
• Rehabilitation / strengthening of substructure
• Replacement of superstructure

• 33 bridges rehabilitated and or strengthened
• 65 new bridges

SENA LINE
28

SENA LINE 570km - Narrow Gage

 Mining Companies supply own rolling stock (MML paid $22/t)
 Companies has entered into an Interim Rail Access Agreement with Portos
e Caminhos de Ferro de Moçambique („CFM‟) on the Sena Rail Line for an
allocation
 Most Company‟s intention to use the Sena Line capacity to commence exports
of coking coal to maximise return on investment
 Companies pay CFM a monthly line access fee
of plus minus $18/ton
• Normal rates are 4.7 US cent /t/km which equals
$26.80/t
SENA RAIL ALLOCATION

CFM PLAN TO INCREASE SENA RAIL
6Mtpa 2014 20Mtpa 2020
12 Mtpa (2017)
Photo: Warehouse no 4 in Beira

THE WAY FORWARD ON THE SENA LINE
32
TECHNICAL
• Minimise the speed constraints on the line ( especially section that
flooded early 2013)
• Break up critical sections with by-pass loops
• Once a homogeneous system is in place increase the length of the by-
pass loop.
• Introduce on-board computers with Telecom system
FUNDING
• Creative funding options with private investors

 Specifications of rolling stock
 Five „new‟ Grindrod RL30SCC-3
 “As new “ locos, GM and GE (good control
and traction systems)
 90 new Gondola-type coal wagons fitted
with the patented Sheffield bogey system
(narrow gauge)
ROLLING STOCK SELECTION

MACUSE LINE
34

MACUSE RAIL LINE

QUAY 11A &B
2014/15
QUAY 9
(2MTPA CAPACITY)
QUAY 8
(6MTPA CAPACITY)
VALE / ICVL ARE USING
VALE /
ICVL
FACILITY
Shallow port – Handy Max Ships
PORT OF BEIRA (CORNELDER)

BEIRA PORT FACILITIES (Indico Site/ Quay 9)
Quay 9
New Dry bulk
terminal

NEW DRY BULK TERMINAL

COSTS:
Straddle Offloading $1-50
Coal to Stockpile $2-50
Skip Loading $6-00 (not paid by Vale & ICVL)
$10-00
Cornelder $14-00
Total $24-00/t
STRADDLE OFF-LOADING

QUAY 11A & B BEIRA (Q1 2017) - CORNELDER
44
Position of future
Quay 11A &B

46
Concessionaire with ESSAR of India
Capital: $600 million
• Support from CFM
• JINDAL
• International Coal venture
Partners (ICVL)
QUAY 13 – PROPOSED LAYOUT

CFM/COLNELDER PLAN TO INCREASE BEIRA
PORT CAPACITY
5Mtpa 2013 20Mtpa 2020
2014
Vale 3 587 471
ICVL 806 492
Jindal 439 224
Traffi 40 633
Total 4 393 830 ton
Quay 11A & B
1.8 Mtpa
(6000t/d)
ESSAR
6-10Mtpa
Shortfall of 3 – 8 Mtpa
Realistic number
12 Mtpa

TRANSHIPMENT SOLUTION
Not for juniors that load a ship every 3 weeks

INITIAL CONSTRUCTION OF THE KEY SIDE

BARGES AND CRANES USED FOR
CONSTRUCTION OF KEY SIDE

CONSTRUCTION OF THE SUPPORT STRUCTURE
FOR THE CONVEYOR TO TRANSPORT
COAL FROM THE STOCKPILES TO
THE SHIP LOADER TRANSHIPMENT SOLUTION

VIEW OF CONVEYOR BELT SYSTEM
THAT WILL FEED THE SHIP LOADERS

Stacker and
reclaimer site
NACALA PORT

CONVEYOR TRANSFER POINTS ON THE
LAND SIDE

NACALA PORT (18 Mtpa – VALE)

Mozambique Reappraises Rail Costs
Mozambique‟s transport ministry lifted the estimated cost of a railway and
port project to boost coal exports to $5bn, almost twice as much as its initial
projection, Reuters reports.
The Mozambique government chose Bangkok-based Italian-Thai
Development as preferred developer to construct the 525km rail line from
Tete province to Macuse in Mozambique‟s Zambezi a province and a port
able to handle 25mtpa of coal.
The project was initially pencilled in at $3bn but the figure has been revised.
The total value of both contracts is estimated at $5bn, with the
construction planned for 2016,”Ministry of Transport spokesman Verlopes”.
Biggest challenge is off-take agreements before project can start
MACUSE PROJECT

Source: Investment Promotion
Centre - Mozambique
Gas
Coal
Hydro
Interim need generators for
wash plant
POWER SUPPLY PROJECTS
Completed
Vilanculos 400MW

Government Participation: The initial phase of the Mining
Contract allows the Government a 5% stake in MML which
aligns Governments interests with that of the company.
The signing of this contract represents a milestone in the process of stabilising the BHR
subsidiary by providing following advantages:
• Security of tenure through this 25 years contract and a predictable long term legal frame
work of investment.
• Fiscal incentives and exemption from custom duties.
• Ability to employ sufficient skilled foreign professionals required to implement planned
development and if required hire international contractors for the term of the contract. (Ex-
pats : 30% project , 20% operations 5yrs , 10% steady state ).
• Training and Employment Programme : Challenge is the Skills shortage.
• Community development programme: MML needs to spend $1 mil in next 5 years and
$4mil over life of mine.
BEE (SA)
SOCIAL AND LABOUR PLAN / EMP / H & S Strategy
MINING CONTRACT

Source: Argus – Coal Trans Maputo
AUSTRALIA vs MOZAMBIQUE COKING COAL

• Latest forecast 10Mt (coking exports) by 2020
• Major potential: Brazil and India (making up nearly 50% of the global
coking coal growth)
• India‟s steel output up 6% (April – Sept 2013)
• Brazil steel output around 40 Mt in 2015
Source: Argus – Coal Trans Maputo
MOZAMBIQUE COKING COAL -
AN OPPORTUNITY

• India chronically short of power, 25% of
populations has no access to power
• Indian domestic coal reserves in the North
East and new power capacity being built in
the South and West, will be better serviced
by imported coal
• Indian domestic coal production has increased at CAGR 4% since 2008
• Indian coal imports have increased at CAGR 21% over the same period
• Ultra Mega Power Projects (UMPP) in the Government 11th five year plan
(2007-2012) envisages the creation of an additional 62 000 MW generating
capacity, not just coal. Each UMMP will have a capacity of
+- 10 Mt/a coal
MOZAMBIQUE THERMAL COAL
Source: World bank, World Coal Institute, Coal Issues Portal, Salva Report on India’s Thermal Coal
Imports and Hatch

50.00
70.00
90.00
110.00
130.00
150.00
170.00
190.00
210.00
Cost/USd/ton
Business Costs Corporate Costs
FOB cash cost ($/t)
Source: report from CRU London
LONG RUN MARGINAL COST CURVE

Coking and
thermal coal
Coking coal
only
Note: US$ / saleable ton
$108/t
$147/t
“Tier 3”
“Tier 1”
THE REALITY OF THERMAL CREDITS

ROM Saleable Product (Mt) SENA line Ncala line
(Mtpa) Coking Coal Thermal Coal Beira (Mt) (Mt)
Vale Moatize 52 10.92 12.48 4 19.4
ICVL Benga 12 2.52 2.88 5.4
Beacon Hill Resources Minas Moatize 3 0.63 0.72 1.35
Jindal 15 3.15 3.6 6.75
Revuboe Talbolt/ Nippon/Posco 10 2.1 2.4 4.5
Bullish commodity cycle Coke &Thermal 22.0 19.4
Bearisth commodity cycle Coking Coal Only 12.4
(Vale 4Mt included)
Assumptions:
1) Mine ROM Capacity
2) 21% coking coal practical yield
3) 24% thermal coal practical yield
Bullish Commodity Cycle
Bearish Commodity Cycle
RAIL CAPACITY ON SENA LINE – A FACTOR
OF WHERE THE COMMODITY CYCLE IS

Witbank-RBCT ($/t) Yield Tete- Mozambique ($/t) Yield Waterberg Coal Field ($/t) Yield
Product Price ($/t)
Coking Coal $110 $110 21%
5900 $60 $60 30%-55%
5400 $52.80 $52.8 30%-55% $52.8 25% $52.8 21%
Eskom 19CV $26.6 20%-30% $26.6 22%
Mining Cost $35 $28 $15
Rail Cost $13.5 $40 $32
Port Cost (RBCT allocation) $4 $23 $4
or Other Ports or $8
Total $53 $91 $51 to $55
Notes
1) US$ = R10
2) Yields are pratical yields
3) $/t is US$ per saleable ton
4) Witbank Coal fields yields are typical for Multi product operations
Eskom dedicated mine mouth operations yields will be > 70%
COMPARING THE THREE RAIL CORRIDORS

Coking Coal in Tete Province (medium term)
• SENA line capacity to 20 Mtpa ( outsource operator,
CFM control)
• Development of Quay 13 in Beira
• Need a Professional dredging company in Beira
• Tax regime to follow commodity cycle
• Mining Contract
• Skills Development
“Mozambique has got the potential to become a role
model for Mining in AFRICA”
HIGH ROAD FOR MOZAMBIQUE COAL

“If the Government manages the process
wisely, Mozambique can become a second
Qatar in the future”
“Rovuma has got major potential for LNG ,
GTL and Power. Why do the Grand INGA
project in the Congo if there is 20% of all
worlds gas reserves in East Africa”
Total project value next 5 -20 years over
$200 billion”
Revuma will replace shale gas in the Karoo,
RSA
ROVUMA HYDROCARBON BASIS

Coal Logistic Challenges in Mozambique

Coal Logistic Challenges in Mozambique

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