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Coal India mulls pull out of Mozambique projects

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World leading coal producer Coal India is considering whether to pull out of Mozambique by relinquishing its two coal blocks due to infrastructure hurdles.

Coal India plans to take a final decision on whether to retain the blocks by next year, only after thoroughly reviewing the estimate of reserves and quality of the coal, The Wall Street Journal reports, citing a senior company executive.

Over the last three years, the company has been looking to acquire international assets in order to overcome delays in mine start-ups in its domestic market, and its plans to pull out of Mozambique may now hit the production growth further.

Coal India meets over 80% of the coal requirements of its domestic market.

Through a government-to-government agreement, the state-owned Coal India acquired the blocks in Tete province in 2009.

However, the development of these projects have been slow, as the company faced several hurdles, right from outsourcing of drilling contracts to infrastructural problems such as insufficient progress in the construction of roads, railway lines and ports.

"I don't know when we will see the infrastructure support to move the coal," the executive told the publication.

Although the company planned to mine the coal from the blocks by 2015, it is two years behind the schedule as drilling work could begin only this year due to complications in outsourcing of drilling contracts.
"If at all we decide to go ahead in Mozambique, there's no way we can meet the initial target to mine coal by 2015," the executive added.

The two blocks have reserves of nearly one billion tonnes of coal, according to the local government's recent estimate.

The company had planned to sell the coal generated from these blocks to its clients in India at a lesser rate than the overseas prices.

Coal India has been reviewing its options to make overseas acquisitions and would be willing to dip into cash reserves of $11bn for funding.

 
 
 
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