The successful development of Mozambique’s coal projects, joined with the start of offshore gas production, preceding the latest discoveries, could possibly lead to the long term discontinuation of global aid to the country.
The predictable growth of Mozambique’s mining industry could lead to a momentous increase in the industry’s contribution to the gross domestic product of the country, contributing to the country’s financial independence. Mozambique is experiencing a coal explosion in the Tete province, with talk of Niassa becoming the next province to be explored and even bigger reserves expected.
It has been reported that Mozambique has considerable coal deposits located in the Moatize and the Mucanha-Vuzi sub-basins in the prospective Zambezi coal basin, in Tete. The Moatize sub-basin comprises 7 coal seams and has reserves projected at 750-million tons, while the Mucanha-Vuzi basin is said to comprise as much as 3 600-million tons in coal reserves, regardless of the basin being severely block-faulted.
Because of this, the country is seeing an increased interest from the Mozambique government to get involved in the industry. Suggested and proposed amendments to the mining law, earlier this year, including a proposal for government to take stakes in major strategic projects, are indicators of such increased interest, but it is not necessarily out of line with tax and mining law reforms being introduced in other mineral-rich countries. One of the positives we are seeing out of the proposed amendments is the suggestion to streamline the licensing process for exploration and mining, thereby lowering the barrier of entry into the industry.
Mining rights and licenses
In its draft new mining law, Mozambique is proposing that business deals involving mining rights and licenses for the country’s resources be executed within the country’s borders. The draft is expected to be submitted to the Mozambique government during the first half of this year.
Mozambique government is likely to change the time frames for mining production. The current legislation enables mining to start 15 years after a mining license has been granted. It is assumed that the new legislation will force exploration and mining companies to start production within two years of licensing. Currently, there are more than 10 significant projects in the feasibility stage, at least one in the bankable feasibility stage, and numerous projects already under construction in the country.
Challenges faced by the mining industry
Numerous ways are being investigated to deal with the export capability and infrastructural development challenges currently faced by the industry, with players busy dealing with the issues either individually or in joint forums. Other challenges faced by the Mozambique mining industry include power shortages, lack of skilled labour, and environmental issues, such as the scarcity of water, as well as potentially significant government interference. In order to overcome these challenges, significant interaction and cooperation will be required between industry players, the communities in which they operate, and government.
However, these challenges are not unique to Mozambique and, therefore, lessons learnt in other jurisdictions on these matters can be used to address the country’s challenges.