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Vale to prioritise Malawi rail project

Brazilian mining group Vale says the construction of a railroad from Moatize in Tete province to Nacala Port through Malawi will take a ‘new significance’, thanks to the poor quality railroad network in Mozambique.

In January this year, the world’s second largest mining company after BHP Billiton, started construction of a 136-kilometre stretch of a new railway line and also repairing an existing 99 kilometres which includes the construction of 45 railway bridges and three road viaducts expected to cost $1.1 billion (K429 billion at the current exchange rate).

The railroad, to be used to carry coal mined in Tete province to the deep water port of Nacala, passing through Chapananga in Chikhwawa, Ntchache and Kanduku in Mwanza, Simon and Mlauli in Neno and Nsamala in Balaka, is expected to be finished in 2014, according to Vale which signed the contract with the Malawi Government in December 2011 to build and operate part of the Nacala Corridor.

According to Mozambique’s online publication, Macauhub, the group has postponed the expansion of mining exploration for a year, from the second half of 2014 to the same period of 2015, the group said while reporting on its accounts for 2012.

“The railroad that links Moatize to Nacala where there is a mining terminal with a capacity to handle 22 million tonnes per year, in which investment is expected to total $4.44 billion and $409 million this year, is due to start operating in the second half of 2014,” said the mining group.

In February, Vale was forced to quote reasons of force majeure [an event that is beyond the control of the authority and the operator] to explain its inability to fulfill some coal supply contracts because of the stoppage of the Sena Railroad, which links Tete to the port of Beira, following flooding.

This means the construction of a new railroad through Malawi will be prioritised, according to transport experts, a development that could result in the company ramping up its activities to beat the deadline, in the process creating more jobs.

Already, Vale has employed more than 2 000 Malawians and many more are benefiting from the project as a result of picking up of business activities along the railroad, through trickledown effect.

President Joyce Banda launched the construction work last December.

The project is expected to reduce Malawi’s transportation cost by about 40 percent, and the country is expected to receive $8 million (K3.1 billion) per year in concession fees, according to Minister of Transport and Public Infrastructure Sidik Mia.

He said earlier that government is expected to earn over $15 million (K5.8 billion) in taxes and concession fees per year, according to the project contract.

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