Company that acquired Rio's Mozambique coal assets eyes expansion

MAPUTO, July 27 (Reuters) - A year after Rio Tinto (LSE: RIO.L - news) pulled the plug on its Mozambique coal venture, the Indian company that bought the assets is planning an ambitious expansion.

The Benga mine acquired from Rio by International Coal Ventures Private Limited (ICVL) has a current production capacity of about 5.3 million tonnes per year but its target is 13 million tonnes in five years' time, ICVL's Mozambique director Nirmal Chandra Jha said on Monday.

Jha, speaking at a Mozambique coal conference, said the mine is currently producing about 4 million tonnes per year, less than half of which is export quality.

Any expansion will hinge on upgrades to Mozambique's rail system, which can only handle about 6 million tonnes per year.

"We hope that in five years, the infrastructure will also improve. That's a big hope," Jha told Reuters on the sidelines of the conference.

Infrastructure challenges were a big reason behind Rio's decision to exit Mozambique, which has some of the world's largest untapped sources of coal but is still recovering from a civil war that ended two decades ago.

The coal assets Rio bought through a $4 billion acquisition of Riversdale in 2011 were sold for just $50 million to ICVL.

Depressed prices are an obstacle to investment and expansion in the present environment.

But ICVL was set up by the Indian government to acquire and develop coal assets to meet the needs of state-owned firms such as the Steel Authority of India, and so the company has potentially deep sources of finance to tap.

Of the 13 million tonnes targeted, about 4.5 million would be for coking coal, used in the production of steel.

India is keen on Mozambique as a potential source of coal because of its ideal local on the western rim of the Indian Ocean, and it needs the commodity to fuel its industrialization.

Indian imports of thermal coal used for power generation are seen outpacing China's in 2015. (Reporting by Ed Stoddard; Editing by James Macharia and Susan Thomas)