Mozambique project to yield 5.3 MT of coal by 2011

Tata Steel, the world's seventh largest steel producer, expects coal production from its joint venture project in Mozambique to touch 5.3 million tonnes (MT) by 2011.

The raw material from Tata Steel's Benga Coal project, which is being executed in partnership with Australian Stock Exchange-listed miner Riversdale, will be used to feed its subsidiary Corus' steel-making facilities in the UK and Europe.

"A feasibility study ... has been completed, which envisages initial production of 5.3 mtpa (million tonnes per annum) by end-2011," the company said in its latest annual report.

The company has plans to augment production from the Benga Coal Project to 20 mtpa gradually. It said the Benga project has coal reserves of 502 million tonnes, "firmly establishing Benga as one of the most significant coal deposits outside Australia."

The Mozambique project is one of the "key projects in the strategy to enhance the Group's raw materials integration," it added.

Tata Steel and Riversdale signed a joint venture agreement in 2007 for the development of a hard coking and thermal coal project at key coal exploration tenements held by Riversdale in Mozambique. Tata Steel paid about US$88.2mn to secure a 35 per cent stake in the project, besides the right to buy 40 per cent of the produce. The company is also one of the largest shareholders in Riversdale Mining Limited (RML).

"Tata Steel has enhanced its holding in Riversdale Mining Limited (RML) to 21.2 per cent and has a 35 per cent equity holding, with 40 per cent offtake rights in Riversdale Mozambique," the company said.

The production in Mozambique is going to start at a time when Tata Steel is under pressure because of high iron ore and coking coal prices, at over $100 and over $200 a tonne, respectively. Tata Steel Chairman Ratan Tata, in the annual report, had expressed his concern over the rising prices of raw material for steel-making, saying that he hoped the mining companies will adopt a "responsible perspective" and not elevate prices for iron ore and coking coal "opportunistically". Following the acquisition of Corus in 2007, which marked the commencement of Tata Steel's European operations, the company today is among the top ten steel producers in the world, with an annual crude steel production capacity of around 30 million tonnes per annum.

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