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Mozambique raises coal railway, port project costs to $5 billion

Workers walk near a cargo ship at the Beira port in Mozambique, February 15, 2013. REUTERS/Agnieszka Flak

MAPUTO (Reuters) - Mozambique has increased the estimated cost of a railway and port project to boost coal exports to $5 billion, almost twice as much as its initial projection, a Ministry of Transport official said.

Mozambique picked Bangkok-based Italian-Thai Development Pcl to construct the 525 km (325 mile) rail line from Tete province to Macuse in Mozambique's Zambezia province and a port able to handle 25 million tonnes of cargo per year.

The project was initially pegged at $3 billion but the figure has been revised.

"The total value of both contracts is estimated at $5 billion, with the construction planned for 2016," Ministry of Transport spokesman Verlopes Nhampossa said.

He did not give a reason for the revision but said technical teams were working on how much money would be spent on the railway line and the port separately.

Mozambique, a former Portuguese colony that emerged from civil war two decades ago, boasts some of the world's largest untapped coal reserves and is expected to become a key source of premium, hard coking coal used in steel making.

However, infrastructure bottlenecks have become a major headache for mining companies in the coal-rich Tete province, with some projects delayed or put on hold due to the problems of getting coal to port.