"Mozambique Mining Report Q3 2016" is now available at Fast Market Research

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 growth will continue to exceed gold output growth. Furthermore, both sectors will continue to a ttract interest from overseas investors .

Latest Developments & Structural Trends

The suspension of donor aid to Mozambique in the wake of the hidden debt scandal has prompted us to downgrade our construction growth forecasts for 2016, to 4.0% in real terms down from the original projection of 4.8% ( see 'Government Debt Scandal Weighs On Infrastructure Outlook', May 9). The government will struggle to fund the road and social infrastructure projects earmarked in its budget, as the weak commodities outlook alongside high recurrent expenditure weighs on the fiscal balance.

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We have revised our coal production forecast on the back of persistent challenges facing the country's coal sector. We forecast the country's coal production to grow from 8.0mnt in 2016 to 9.5mnt by 2020, representing an average growth of 4.2% y-o-y during 2016-2020.

Mozambique's coal production growth will continue to be hampered by weak global coal prices, high domestic start-up costs and inadequate infrastructure. Despite this, growth will be supported by increasing investment coming into the market, which will support long-term production growth. A key project underway is the USD300mn modernisation project at the port of Nacala in the Nampula province, bolstered by funding from the Japanese government and on track for completion by 2020. The development is supported by the 912km railway linking the port to the country's vast reserves in the Tete province, completed in 2014; and the Nacala-a-Velha coal terminal which opened in 2015. These projects form part of the Nacala Logistics Corridor, commissioned by Vale in 2012 to link the reserves to the east coast of Mozambique. In 2015 the company received an USD300mn loan from the African Development Bank to increase export capacity at the port of Beira.

We forecast Mozambique's gold output to total 0.01mn ounces (moz) by 2020. This represents an average annual growth of 1.1% during 2016-2020. The lack of formal organisation of gold mining activity will ensure 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 just under USD8mn, while the country's coal output was worth an estimated USD428mn.

The Mozambique Mining Report has been researched at source and features BMI Research's mining and commodity forecasts for metals, minerals and gems, covering all major indicators including reserves, production, exports and values. The report also analyses trends and prospects, national and multinational companies and changes in the regulatory environment.

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