MAPUTO, The Mozambican government has signed a memorandum of understanding (MoU) with a Chinese steel company to set up an industry to transform thermal coal extracted from mines in Tete Province into coking coal.

The plant, budgeted at around 1.3 billion US dollars, will be set up in the northern province of Nampula, in the transport corridor leading to the port of Nacala.

The MoU was signed here Friday by the Permanent Secretary of the Ministry of Industry and Trade, Carla Soto, and by the chairperson of China Brasil Xinnenghuan International Investment (CBSteel), Zhang Shengsheng.

Witnessing the ceremony were the Deputy Minister of Industry and Trade, Rajendra de Sousa, and the Chinese Ambassador to Mozambique, Su Jian.

The plant has a planned production capacity of four million tonnes of coking coal a year, and construction work is due to begin in the second half of this year.

De Sousa said that setting up this type of industry would create “very attractive” economic conditions for investment. “For us Mozambicans, this project will contribute to better management of our raw materials We should thus increasingly build up the capacity of our local labour force, in order to accompany the growing competitiveness of industry,” he added.

None of the companies currently mining coal in Mozambique, such as the Brazilian and Indian mining companies Vale and Jindal, have a monopoly, he stressed, and the entry of CBSteel would create greater competition in the Nacala Corridor, which would be beneficial for the Mozambican economy.

According to Zhang, construction of the factory could take about a year, and would create 1,500 direct jobs. He envisaged a major industrial zone springing up around the factory, with the potential to create many more jobs.

The coking coal produced at the new factory can be exported from Nacala to CBSteel’s steel mills in Brazil. The raw material, thermal coal from the Tete mines, can reach Nampula along the railway from the Moatize coal basin, which runs through southern Malawi and links up with the Nacala Corridor.