EIB Lends EUR65 Million For Mozambique Coal Rail Link Project

MAPUTO, Mozambique (AFP)--The European Investment Bank and Mozambique Thursday signed a EUR65 million deal to fund a rail project to link coal mines to a major port, a spokeswoman said.

The loan is part of a EUR195 million upgrade to the Sena rail link to connect northwestern coal mines and the Beira port.

The projects aim to improve Mozambique's languishing transport system and enable a slate of new multinational mining projects to export coal from the under-explored Moatize district.

"We saw the economic value in this project," said EIB spokeswoman Una Clifford. "This is a project that will provide employment during construction, and it will help to open up trade links to other southern African countries which are landlocked."

The EIB loan comes with a EUR29 million interest rate subsidy from the European Union's African infrastructure trust fund, Clifford said.

Mozambique has seen a boom in its mining sector as multinational companies move to tap resources that went untouched during the country's 16-year civil war.

Brazilian mining giant Vale (RIO) broke ground in March on a EUR980 million mine in Moatize, and Australia's Riversdale (RIV.AU) this week received a license for a EUR600 million mine nearby. The government has awarded more than 100 mining licenses in all.

But tapping Moatize's full potential - an estimated 26 million metric tons a year of coal - also means restoring the Beira transport corridor.

The Sena railway was made impassable by land mines during the war, and the main access channel to the Beira port has shrunk after years of inadequate dredging.

Construction on the railway is scheduled for completion in September, with the line expected to open to full traffic in January 2010.

The World Bank has also provided EUR78 million in financing for the project.