However, with years of delays and operation difficulties and huge unexpected thermal volume has limited the potential.  As a result, only 6.4Mt of exports were achieved in 2021.

However, the recent ban on Russian coal is giving one last glimpse of hope to Mozambique, with European seeking for alternatives to replace Russian Coal. Vulcan’s Moatize mine is the leading operation, with coking coal exports expect to exceed 4.1Mt in 2022 with positive cash margins.

Are other producers likely to grab this last chance in the coming years to fulfil Mozambique’s massive supply potential?

Current Status

Mozambique’s metallurgical coal exports increased to 6.4Mt in 2021 after falling to 4.5Mt in 2020, as low prices severely affected the country’s relatively high-cost production. Exports are expected to increase in the coming years as European countries seek alternatives to the Russian coal.

This recovery is expected to be led by Moatize mine, where work has finished on a preparation plant and upgrades to the Nacala logistics corridor rail line and port. Though production from Moatize may be affected by seasonal heavy rain weather, an increase of up to 8Mtpa of metallurgical coal is expected in the long term. The country’s supply is forecast to gradually increase to 13.2Mt by 2024 and continue the uptrend to reach 34Mt by 2040

The country has adopted and implemented ESG measures much faster than other African nations. Mozambique has set its target to achieve a 40MtCo2e reduction of greenhouse gas emissions between 2020 and 2025, according to its last Nationally Determined Contribution (NDC).

In 2021, Mozambique received support from the Emission Reductions Payment Agreement (ERPA) and the Forest Carbon Partnership Facility (FCPF) for US$6.4m for reducing 1.3Mt of carbon emissions since 2019.

Key Players

Currently, there are only three actively producing coal mines in Mozambique, of which only two are exporting metallurgical coal. These exporting mines are Vulcan Minerals’s Moatize and Jindal Steel’s Songa operations, both located in Tete Province.

Moatize progressed well during its ramp-up in 2017, doubling metallurgical coal exports to around 7Mt. Output growth has largely stagnated with the mine plagued by operational difficulties and an increase in the portion of thermal coal in the sales mix. As a result, Moatize produced around 4.1Mt of metallurgical coal for the export market in 2021.

Moatize is considered one of the world’s biggest coal mines by reserves, with a production capacity of 22Mtpa. However, the mine’s output has decreased from more than 11.6Mt in 2018 to around 5.8Mt in 2020, partly due to geological problems.

Vale has implemented a large-scale maintenance program at the mine to expand its coal output, focusing on increasing the metallurgical to thermal coal ratio. AME anticipates that Moatize will expand production to a range of 15-18Mtpa, depending on coal prices and solving quality issue.

In December 2021, Vale announced the sale of Moaztize to Indian miner Vulcan Resource for US$270m. The sale was part of Vale’s commitment to become carbon-neutral by 2050 and to reduce its Scope 1 and 2 emissions by 33% by 2030.

The completion of the transaction was concluded in late April this year. Vale sold 95% of its interest in Moatize and 70% of its interest in the Nacala Corridor Rail & Port project as a single package to Vulcan Resources, a subsidiary of India's Jindal Group.

The second largest metallurgical operation in Mozambique is Songa Mine in Tete Province. Songa mine, or Chirozdi, produces semi–hard coking coal for the export market, as well as thermal coal for the domestic market. Songa produced 0.9Mt of metallurgical coal in 2021.

Jindal plans to expand production to 3Mtpa in the short term to 6Mtpa. Songa benefits from low strip ratios and low labour costs but suffers from significant transportation costs.

Jindal commenced production at its Songa mine in 2012. In the first four years, the miner failed to exceed 0.5Mtpa of production, due to high mining costs and a lack of capacity on the Beira rail line. Due to unprofitability, Jindal idled Songa in February 2016, before restarting in October that year. The mine has been producing around 1.5Mtpa of saleable coal since.

New Project Hurdle

In its early stages, the development of coal projects in Mozambique suffered multiple setbacks. Infrastructure constraints on the landlocked Tete province meant a new, high-cost logistics network was required. This took some years to reach running capacity, with several issues, including gun attacks on trains, still ongoing.

Additionally, it was discovered that most of the major deposits had poorer coal specifications than were originally reported and the level of phosphorus—which increases the brittleness of sponge iron—was found to be unexpectedly high. As such, reserves and resources were often overstated, with companies such as Vale forced to revise down reserve estimates and decrease the share of metallurgical-grade coal.

Combined with government intervention, any new Mozambican coal project is likely to experience some, or all, of these setbacks, which will be further complicated if the coal price continues to fall.

Future Prospects.

Talbot Group’s Revuboe project was planned to produce 8Mtpa, of which approximately 63% would be hard coking coal. With a predicted relative low capital cost of US$500m and strong joint venture partners in Nippon Steel & Sumitomo and POSCO, the signs for Revuboe were promising when a mining concession was granted in August 2013.

Since then, all development progress on the project seems to have ceased, with no further developments reported by the controlling company Minas de Revuboe.

ICVL’s Zambeze project was intended to produce at a nameplate capacity of 16Mtpa, targeting ~10Mtpa hard coking coal and ~6Mtpa domestic thermal coal at a strip ratio of 5:1.

ICVL were planning to develop Zambeze after ramping up its Benga mine to its nameplate 13Mtpa, likely to be achieved by around 2025. There is considerable doubt over Benga’s expansion, and the Indian government is distancing itself from exploration blocks in Mozambique.

These future projects have great potential and the chance to revive if Europe fails to find alternative supply to replace Russian coal in the near future. However, high mining costs and lack of infrastructure will be the key hurdle that will need to be addressed for Mozambique to be a viable supplier for Europe.