US$38 million contract awarded for Nacala corridor

The development of the Nacala corridor project inMozambique is well underway as new contracts are awarded. It is an essential component for the country’s emerging coal mining sector.

The Nacala corridor project is intended to provide alogistics solution for the transportation of coal mined at Moatize, in Tete province to the maritime terminal located in Nacala on the Indian Ocean, via a new 912 km long railway corridor.

Most recently, Kentz Corporation, the holding company of Kentz Engineers and Constructors Limitada, has been contracted to undertake the structural, mechanical, electrical and instrumentation erection and provide commissioning assistance required to construct the main stock yard equipment. Kentz will erect 13 km of interconnecting belt conveyors as well as assemble and install circa 14 000 t of equipment including tipplers, stackers, reclaimers and shiploaders.

Corredor Logistico Integrado de Nacala S.A., (CLIN – a joint venture company between Vale Moçambique Limitada (80%) and CFM, the Mozambique Port and Railways Authority (20%)) awarded the contract, which is scheduled for completion in November 2014.

The US$38 million contract will be executed by the construction business unit, which will mobilise a peak project workforce of 700 staff and field personnel. This workforce will be primarily made up of workers local to Mozambique.

“With the award of this important project, Kentz is delighted to continue the relationship with Vale inMozambique. Following the successful completion of Moatize Phase 1, the award of this critical component of the Nacala corridor project demonstrates the confidence this key client has in our ability to deliver complex, fast track projects in geographically challenging areas,” says Carl Dyer,Kentz Regional MD for Africa.

Ralated Article: Rio Tinto’s US$14 bn impairment charge – Tom Albanese steps down

Rio Tinto today announced that its assets are not as recoverable as originally predicated and as a result expects to recognise a non-cash impairment charge of approximately US$14 billion (post tax) in its 2012 full year results. The announcement subsequently sees CEO Tom Albanese step down as chief executive with immediate effect.

The impairments include an amount of approximately US$3 billion relating to Rio Tinto Coal Mozambique(RTCM), as well as reductions in the carrying values ofRio Tinto‘s aluminium assets (mostly Rio Tinto Alcan(RTA) but also Pacific Aluminium) in the range of US$10-11 billion.

The group also expects to report a number of smaller asset write-downs in the order of US$500 million. The final figures will be included in Rio Tinto‘s full year results on 14 February 2013.

Tom Albanese’s resignation is by mutual agreement with the Rio Tinto Board. Rio Tinto Iron Orechief executive Sam Walsh has been appointed as his successor from today. Doug Ritchie, who led the acquisition and integration of the Mozambique coal assets in his previous role as Rio TintoEnergy chief executive, has also stepped down by mutual agreement.

“The Rio Tinto Board fully acknowledges that a write-down of this scale in relation to the relatively recent Mozambique acquisition is unacceptable. We are also deeply disappointed to have to take a further substantial write-down in our aluminium businesses, albeit in an industry that continues to experience significant adverse changes globally,” says Rio Tinto chairman Jan du Plessis.

“I would like to pay tribute to Tom for his considerable contribution to Rio Tinto over more than 30 years of service and for his integrity and dedication to the company. I would also like to thank Doug for his 27 years of service to the group and particularly for his invaluable work in developing our relationships in China. I wish them both well for the future.

“Rio Tinto‘s underlying business and balance sheet remain in good health, and we are taking decisive action to improve our competitive position further with an aggressive cost reduction plan. As announced on 15 January, we had a strong production year in 2012, particularly in our low-cost iron ore business where we produced a record 253 Mt. Since the price of iron ore dropped to a low of less than $US90/t last September, prices rebounded strongly reaching a level of around $US150/t earlier this week, albeit in an environment of continuing volatility.”

“While I leave the business in good shape in many respects, I fully recognise that accountability for all aspects of the business rests with the CEO. I am pleased that someone of Sam‘s calibre and values has been chosen to succeed me as chief executive. This is a great company and Sam will do an outstanding job,” says Albanese.

The further deterioration in aluminium market conditions in 2012, together with strong currencies in certain regions and high energy and raw material costs, has had a negative impact on the current market values in the aluminium industry.

In Mozambique, the development of infrastructure to support the coal assets is more challenging than Rio Tinto originally anticipated. Rio Tinto sought to transport coal by barge along the Zambezi River, but this option did not receive formal approvals.

These infrastructure constraints, combined with a downward revision to estimates of recoverable coking coal volumes on the RTCM tenements, have led to a reassessment of the overall scale and ramp up schedule of RTCM, and consequently to the impairment announced today.

Rio Tinto continues to engage with the Government of Mozambique on all transport infrastructure options.