Identifier
Created
Classification
Origin
06MAPUTO422
2006-04-11 08:10:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Maputo
Cable title:
Mozambique: Brazilian CVRD Considering Buying Out
how-toVZCZCXRO8935 RR RUEHDU RUEHJO RUEHMR DE RUEHTO #0422 1010810 ZNR UUUUU ZZH R 110810Z APR 06 FM AMEMBASSY MAPUTO TO RUEHC/SECSTATE WASHDC 5249 INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY RUEHLMC/MILLENNIUM CHALLENGE CORP WASHINGTON DC RUCPDOC/DEPT OF COMMERCE WASHDC RUEHC/DEPT OF LABOR WASHDC RUEATRS/DEPT OF TREASURY WASHDC
UNCLAS MAPUTO 000422
SIPDIS
SIPDIS
AF/S FOR HTREGER AND JMALONEY
STATE PASS OPIC
JOHANNESBURG FSC FOR RDONOVAN
JOHANNESBURG TDA FOR DSHUSTER
USDOC FOR RTELCHIN
MCC FOR SGAULL
USAID FOR AA/AFR AND AFR/SA
SENSITIVE
E.O. 12958: N/A
TAGS: ECON EAID EINV ETRD MZ
SUBJECT: Mozambique: Brazilian CVRD Considering Buying Out
OPIC-backed Nacala Corridor Rail Consortium
Sensitive But Unclassified - Handle Accordingly
UNCLAS MAPUTO 000422
SIPDIS
SIPDIS
AF/S FOR HTREGER AND JMALONEY
STATE PASS OPIC
JOHANNESBURG FSC FOR RDONOVAN
JOHANNESBURG TDA FOR DSHUSTER
USDOC FOR RTELCHIN
MCC FOR SGAULL
USAID FOR AA/AFR AND AFR/SA
SENSITIVE
E.O. 12958: N/A
TAGS: ECON EAID EINV ETRD MZ
SUBJECT: Mozambique: Brazilian CVRD Considering Buying Out
OPIC-backed Nacala Corridor Rail Consortium
Sensitive But Unclassified - Handle Accordingly
1. (U) Summary: On March 31 the Brazilian company CVRD and
the OPIC-supported US/Mozambique consortium managing the
Nacala railroad corridor, CDN, reached an agreement giving
CVRD the option, until the end of 2006, to purchase CDN.
CVRD is currently assessing prospects in the Moatize coal
basin. Should CVRD decide to go forward in developing the
Moatize coal mine, CVRD likely will purchase CDN's rights to
the railroad so that it can use the line - upon building a
130 kilometer spur linking Moatize to the railway inside
Malawi - to export its coal through Nacala's deep-water bay.
A decision is expected later this year. End Summary.
2. (U) On March 31 CVRD (Companhia Vale do Rio Doce) and the
US/Mozambican consortium Corredor de Desenvolvimento do
Norte (CDN),which operates the Nacala railway line and
Nacala port, reached an agreement giving CVRD the option
until the end of 2006 to purchase CDN's railway concession.
The two American companies in the CDN consortium are
Railroad Development Corporation and Edlow Resources. The
Mozambican partners comprise a group of private investors,
the railroad parastatal CFM, and the Manica Freight company.
An undisclosed price has been agreed to, with the final
figure to vary by only USD 300,000, depending on results of
a study of CDN's accounts that CVRD will carry out this
summer. According to Fernando Couto, head of Manica
Freight, under the option agreement CVRD will assume all of
CDN's USD 30 million liabilities to OPIC. (Note: In a
meeting with emboffs, Couto expressed gratitude for OPIC
financing for CDN's operations of Nacala line, which he
indicated enabled CDN to negotiate from strength with CVRD
for a buy-out price. End note.) Ultimately, the purchase is
contingent on a positive decision by the CVRD board on the
entire Moatize project.
3. (U) CVRD won the bidding to develop massive coal
deposits in the Moatize region in Tete province in November
2004. (Note: AMCI, an American coal producer, has a five
percent share in the CVRD project. End note.) The Moatize
region is considered the largest unexplored coalfield in the
world, with deposits estimated at 2.4 billion tons. CVRD
began feasibility studies in early 2005 on various aspects
of the project - the mine, a coal-fired power station, a 130
km railway spur to the Nacala line in Malawi (see below),
and rehabilitating the Nacala line. According to Embassy
sources, feasibility study results will be presented to the
CVRD board this summer and a decision whether to proceed
will be made by late fall.
4. (U) CVRD is planning to move 14-15 million tons of coal
yearly out from Mozambique. Last year CVRD briefly assessed
utilizing the Sena railway line to the port of Beira, but
the idea was never seriously considered because Beira has a
shallow port. Engineers concluded using Beira would require
building a 14-kilometer pier to reach deep water. Beira was
dropped, then, in favor of Nacala, which has the deepest
port in southern Africa.
5. (U) Moving coal out via Nacala will require building a
130 km spur from Moatize eastward into Malawi to join the
Blantyre - Nacala railway line. About 50 km of the
additional spur would be in Mozambique, the other 80 km in
Malawi. Couto said that construction of the spur would take
three to four years. The existing rail line down to Nacala
will have to be upgraded, with sidings added so that coal
trains will not block other traffic on the line.
6. (SBU) Comment: OPIC's involvement was critical in
enabling CDN to demonstrate the viability of this export
corridor and as backing in negotiations with the Brazilian
giant, CVRD. This deal is not yet concluded, but if it goes
forward it will have a very positive impact on the northern
railway corridor and Nacala port, an area which is also the
focus of Mozambique's MCC proposal.
SIPDIS
SIPDIS
AF/S FOR HTREGER AND JMALONEY
STATE PASS OPIC
JOHANNESBURG FSC FOR RDONOVAN
JOHANNESBURG TDA FOR DSHUSTER
USDOC FOR RTELCHIN
MCC FOR SGAULL
USAID FOR AA/AFR AND AFR/SA
SENSITIVE
E.O. 12958: N/A
TAGS: ECON EAID EINV ETRD MZ
SUBJECT: Mozambique: Brazilian CVRD Considering Buying Out
OPIC-backed Nacala Corridor Rail Consortium
Sensitive But Unclassified - Handle Accordingly
1. (U) Summary: On March 31 the Brazilian company CVRD and
the OPIC-supported US/Mozambique consortium managing the
Nacala railroad corridor, CDN, reached an agreement giving
CVRD the option, until the end of 2006, to purchase CDN.
CVRD is currently assessing prospects in the Moatize coal
basin. Should CVRD decide to go forward in developing the
Moatize coal mine, CVRD likely will purchase CDN's rights to
the railroad so that it can use the line - upon building a
130 kilometer spur linking Moatize to the railway inside
Malawi - to export its coal through Nacala's deep-water bay.
A decision is expected later this year. End Summary.
2. (U) On March 31 CVRD (Companhia Vale do Rio Doce) and the
US/Mozambican consortium Corredor de Desenvolvimento do
Norte (CDN),which operates the Nacala railway line and
Nacala port, reached an agreement giving CVRD the option
until the end of 2006 to purchase CDN's railway concession.
The two American companies in the CDN consortium are
Railroad Development Corporation and Edlow Resources. The
Mozambican partners comprise a group of private investors,
the railroad parastatal CFM, and the Manica Freight company.
An undisclosed price has been agreed to, with the final
figure to vary by only USD 300,000, depending on results of
a study of CDN's accounts that CVRD will carry out this
summer. According to Fernando Couto, head of Manica
Freight, under the option agreement CVRD will assume all of
CDN's USD 30 million liabilities to OPIC. (Note: In a
meeting with emboffs, Couto expressed gratitude for OPIC
financing for CDN's operations of Nacala line, which he
indicated enabled CDN to negotiate from strength with CVRD
for a buy-out price. End note.) Ultimately, the purchase is
contingent on a positive decision by the CVRD board on the
entire Moatize project.
3. (U) CVRD won the bidding to develop massive coal
deposits in the Moatize region in Tete province in November
2004. (Note: AMCI, an American coal producer, has a five
percent share in the CVRD project. End note.) The Moatize
region is considered the largest unexplored coalfield in the
world, with deposits estimated at 2.4 billion tons. CVRD
began feasibility studies in early 2005 on various aspects
of the project - the mine, a coal-fired power station, a 130
km railway spur to the Nacala line in Malawi (see below),
and rehabilitating the Nacala line. According to Embassy
sources, feasibility study results will be presented to the
CVRD board this summer and a decision whether to proceed
will be made by late fall.
4. (U) CVRD is planning to move 14-15 million tons of coal
yearly out from Mozambique. Last year CVRD briefly assessed
utilizing the Sena railway line to the port of Beira, but
the idea was never seriously considered because Beira has a
shallow port. Engineers concluded using Beira would require
building a 14-kilometer pier to reach deep water. Beira was
dropped, then, in favor of Nacala, which has the deepest
port in southern Africa.
5. (U) Moving coal out via Nacala will require building a
130 km spur from Moatize eastward into Malawi to join the
Blantyre - Nacala railway line. About 50 km of the
additional spur would be in Mozambique, the other 80 km in
Malawi. Couto said that construction of the spur would take
three to four years. The existing rail line down to Nacala
will have to be upgraded, with sidings added so that coal
trains will not block other traffic on the line.
6. (SBU) Comment: OPIC's involvement was critical in
enabling CDN to demonstrate the viability of this export
corridor and as backing in negotiations with the Brazilian
giant, CVRD. This deal is not yet concluded, but if it goes
forward it will have a very positive impact on the northern
railway corridor and Nacala port, an area which is also the
focus of Mozambique's MCC proposal.