Vale’s decision to sell its Moatize coal mines and the Nacala Logistics Corridor to India’s Jindal for $270 million is causing concerns in Tete of potential job losses, that commitments to the local community will be abandoned, and further degradation of the environment, while the structure of the deal suggests it may be part of a broader ‘greenwash’ strategy at the Indian conglomerate.

Jindal Steel and Power Limited (JSPL), which is listed on the Mumbai stock exchange in India, already owns one coal mine in Tete, at Chirodzi. The company is buying the Moatize mines, however, through an unlisted subsidiary called Vulcan Minerals.

The decision to purchase the Moatize mines through an unlisted entity appears to form part of efforts to keep ‘dirty’ fossil fuel activities out of JSPL, which as a listed entity attracts greater scrutiny.

“Given increasing pressure from an ESG [environmental and social governance]perspective, the asset has been acquired under one of the promoter entities”, Ritesh Shah, a Mumbai-based analyst at investment bank Investec told Zitamar News.

JSPL has used so-called ‘promoter entities’ — private, unlisted companies related to the parent company — to take other assets off its books. It is currently in the process of selling its power generation business to another such entity, called WorldOne. Despite WorldOne also being owned by the Jindal Group, JSPL characterised the internal sale of coal-fired power generation assets as a move which “will help the company go green”, in its latest shareholder update.

Splitting clean energy from fossil fuel investments is becoming a trend for energy companies in India and elsewhere, according to Sandeep Pai, an Indian senior researcher with the Center for Strategic and International Studies. He pointed to the Adani Group, a major Indian conglomerate which has split its renewables business, now called Adani Green Energy, from its coal-fired portfolio, held under another company, Adani Power. “You’re not getting traditional funding so you create a separate entity to attract those investments,” he told Zitamar News. “There is still demand for those kinds of resources” — referring to coal and coal-fired power — “in some countries including India.”

“Having anything coal-related in a listed company these days is really, really problematic,” agreed Tim Buckley, head of Sydney-based think tank Climate Energy Finance, who focuses on the energy transition in India, China, and Australia.

However, Buckley said, the likes of Jindal and Adani will still face problems raising funds if they are still investing in coal. “The financial markets aren’t stupid. You can’t have six subsidiaries and say three are clean and good ESG, and three are dirty, and think that the financial markets aren’t going to recognize that intercompany transfers are the basis of operation.”

Jindal repeatedly failed to answer questions about where Vulcan Minerals is domiciled, and a spokesman stopped taking calls from Zitamar. An anonymous source claiming to be a Jindal representative told Zitamar that Vulcan Minerals is incorporated in Mauritius.

The Mauritian online company register has no record of a Vulcan Minerals, though it does have a Vulcan Resources and a Vulcan Steel, both incorporated in the last two years by directors of other companies within the Jindal group. Vulcan Steel bought Jindal’s Omani steel operations in 2020, in a deal reportedly designed to reduce debt in the listed parent company.

Another cut-price coal deal in Tete

The cut-price disposal of a coal project that has seen billions of dollars sunk into it is reminiscent of Rio Tinto’s sale of a group of neighbouring mines and licences to a consortium of Indian state-owned companies, ICVL, in 2014 for $50 million — having paid $3.7 billion for it four years earlier.

Vale valued its mines in Moatize at $3bn in 2014, when it agreed to sell a stake in the mines to Japan’s Mitsui, along with a stake in the long and complex logistics corridor, with a railway running through Malawi to a purpose-built coal export terminal at Nacala on Mozambique’s Indian Ocean coast.

By the time Mitsui closed its $733m investment, the value of the mines had been written down to $1.7bn — but the two companies still managed to borrow $2.7bn against the projects, mainly from Japanese state and private lenders.

That loan, signed in 2017, was due to be repaid by the project over 14 years. This year, however, Vale repaid it from its own funds, after Mitsui walked away from the project, being bought out for a symbolic $1.

The mine and logistics line together are now selling for $270m, which arguably represents an even greater discount than ICVL’s acquisition of Rio Tinto’s mines — which had become something of a stranded asset due to Rio’s failure to come up with a solution for taking the coal to port, after Mozambique refused to let the company send it down the Zambezi river.

The asset that Jindal is now buying — for less than one tenth of what the mines alone were valued at less than a decade ago — comes with a working logistics solution, which makes it a different proposition from the Rio Tinto assets.

The mining operation, too, is far more developed than Rio Tinto’s, and has benefited from a significant revamp over the last year, to find further efficiencies.

JSPL recently restarted operations at its Russell Vale coal mine in Australia, which has lain dormant for six years. Indian credit rating agency ICRA last week improved JSPL’s credit rating, citing improved access to raw materials through Russell Vale and a gradual increase in production at the Chirodzi mine in Mozambique. The rating made no mention of the planned purchase in Moatize.

Coal demand in India is still on the rise, but is likely to peak in the next 4-5 years, according to Pai of the CSIS — or even the next year or two, according to Buckley.

Buckley expects that, before the end of the year, the Adani Group at least will have pledged to build no new  coal mines or coal-fired power plants, as many countries and power producers have already done.   “I think they are just trying to find the right time. I can understand their problem, because for Adani to come out and be anti coal is actually really politically difficult because prime minister Modi hasn’t pledged peak coal as yet,” he said.

Environmental and social chaos

Since Jindal’s impending acquisition of the Moatize project was announced, civil society organisations in Mozambique have been scrambling to get Vale to fulfil commitments it has made to the community before it leaves Moatize.

The Mozambican lawyers’ association has called for a billion meticais ($15m) in further compensation to be paid to families resettled by Vale, who have consistently complained that the resettlement was a failure and that their lives were destroyed. Other communities are still waiting to be resettled away from the mining area.

Erika Mendes of Mozambican environmental advocacy group Justica Ambiental (JA) told Zitamar that “the level of damage that Vale caused in the district of Moatize cannot be overemphasised.

“There are several legal cases which are still ongoing,” she said, and Vale has been dragging its feet over negotiations with brickmakers and peasants who have lost their livelihoods due to the expansion of the mine. Problems linked to the 2011 resettlements still haven’t been resolved. All of this suggests that the company is preparing to leave the country and leave behind a huge environmental, social and economic debt,” Mendes said.

She is pessimistic about how things will develop under the mines’ new owner, too. “[Jindal has] operated their Chirodzi mine for more than six years with hundreds of families still living inside the concession area — some of them less than 1km from the explosions — in a blatant violation of Mozambican legislation,” she said.

Domingos Malangaze, a resident of the N’tchenga neighbourhood in Moatize, told Zitamar he’s been waiting for 10 years to be resettled — and the news of the mines’ sale to Jindal left him feeling desperate. 

“I’m out of hope. If Vale never took us out of here for all these years, imagine what Jindal — who still have people living in the zone of risk at their mine — will do,” he said.

António Biala, a member of the municipal council in Moatize, said Jindal’s dry dock, located in the middle of a residential area in the Liberdade neighbourhood of Moatize, shows the company’s lack of interest in the health of the local population. “We’re expecting worse days with Jindal,” he said — adding that the company has already failed to resettle people living near the dry dock.

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