Mozambique Mining Report Q2 2016

Mozambique Mining Report Q2 2016

BMI View: Mozambique's mining revenue will remain heavily dependent on the country's coal sector,leaving the sector exposed to continued global coal price weakness. Despite this, coal production growthwill continue to exceed gold output growth. Furthermore, both sectors will continue to attract interest fromoverseas investors.

Latest Developments & Structural Trends

Mozambique's coal production growth will continue to be hampered by weak global coal prices, highdomestic start-up costs and inadequate infrastructure. As such, we have revised our coal productionforecast on the back of persistent challenges facing the country's coal sector. We forecast the country'scoal production to grow from 8.0mnt in 2016 to 9.5mnt by 2020, representing an average growth of 4.2%y-o-y over 2016-2020.

Despite this, growth will be supported by increasing investment coming into the market, which willsupport long-term production growth. For instance, the Nacala-a-Velha coal terminal, in the country'sNampula province, opened in mid-July 2015, receiving its first transport of coal. This port developmentwill provide an alternative route for the transportation of coal from Tete, and Vale has been particularlyforthcoming with investment. The country's long-term potential as a coal exporter will have to beconsidered against increasing political risk and government intervention in the mining sector. In Q114,Mozambique's government announced its intention to increase taxation on the mining sector and toensure greater mineral wealth is allocated locally. Although we expect the country to remain amenable toforeign investment and to maintain a broadly attractive business environment, this policy move in themining sector will be a cause for concern amongst investors.

We forecast Mozambique's gold output to total 0.01mn ounces (moz) by 2020. This represents an averageannual growth of 1.1% during 2016-2020. The lack of formal organisation of gold mining activity willensure the industry remains in the shadow of the country's coal mining sector over the next few years.According to 2014 estimates, the combined worth of Mozambique's gold production in 2014 was justunder USD8mn, while the country's coal output was worth an estimated USD428mn.

BMI Industry View
Table: Mozambique Mining Industry Value
Latest Developments & Structural Trends
Industry Forecast
Coal: Investment To Boost Growth
Latest Developments
Table: Mozambique - Coal Production Forecasts
Table: Mozambique - New Coal Projects
Structural Trends
India & Japan To Ramp Up Investment
Price Drop Hits Profitability Though Not Output
Infrastructure Remains Key Challenge
Gold: Growth To Lack Behind Coal Sector
Latest Developments
Table: Mozambique - Gold Production Forecast
Table: Mozambique - Gold Projects
Structural Trends
Exploration Points To Potential Long-Term Expansion
Industry Risk Reward Ratings
Mozambique - Mining Risk/Reward Index
Industry Rewards
Country Rewards
Industry Risks
Country Risks
Africa: Major Risks Remain
Key Takeaways
Latest Revisions
Table: Africa - Mining Risk/Reward Index
Regulatory Development
Recent Developments
Trade & Investment Risk Analysis
Commodities Forecast
Commodities Outlook
Table: BMI Commodities Price Forecasts
Competitive Landscape
Table: Select Companies - Comparative Metrics
Company Profile
Vale - Q2 2016
Company Overview
Company Strategy
Latest Results
Table: Vale - Key Financial Data
Company Details
Regional Overview
Table: SSA - Government Involvement In Mining Sector
Industry Forecast Methodology
Risk/Reward Index Methodology
Table: Weighting Of Indicators

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