Rio Tinto to Sell Mozambique Mines to India Coal Group

Mining behemoth Rio Tinto (LSE:RIO) is expected to sell three of its coal mines in Mozambique to a group of Indian state-run metal and mining companies for $108 million.

According to reports, India’s International Coal Ventures Private Limited (ICVL) will purchase 65 percent of the Benga coal operation in the Tete province of Mozambique, and 100 percent in the other two coal projects – Tete East and Zambeze.

"We expect the deal to be signed over the next three to four days," said a government official involved with the negotiations.

The acquisition will be the first for ICVPL, which was set up in 2009 to buy assets abroad by government-run companies including Steel Authority of India Ltd., Coal India Ltd. and power producer NTPC Ltd.

The proposed deal isn't surprising. Existing coal mines in India have been failing to meet targets, forcing the country to import coal. India’s electricity shortage climbed to 7,000MW in May.

Output for the three mines, including metallurgical coal and thermal coal, came to 733,000 tons in the first half of 2014. If the proposed deal goes through, the acquisition will assist ICVL in achieving its 2019-20 target of owning 500 million tons of coking coal reserves five years in advance.

Rio Tinto originally purchased the mines in 2011 when it acquired Riversdale Mining Ltd for $3.7 billion. Ironically, ICVL made a bid to acquire the Benga mine but lost out to Rio Tinto in the process.