Coal Mining Industry Is Set For Boom Times

Far, far away from the madness in the markets, a huge profit opportunity is taking shape...

You see, the former Portuguese colony of Mozambique on Africa’s east coast is sitting on what is probably the last great unexploited coal reserve in the world.

The colossal Moatize coal reserve is located deep in the interior of the country. But that hasn’t put-off the multinational corporations. They have seen a chance to make a killing here. And they’re going straight for the jugular…

And that’s why we are so excited by this.
Giant international companies are moving in

Coal is critical to the global economy. The International Energy Agency forecasts that it will be the fastest-growing source of energy worldwide for the next two decades. Yes, it is filthy and polluting. And personally, I’d like to see it banned. But it is also what the global economy will rely on to keep growing. The coal industry is now set for boom times.

The giant Brazilian steel company, Vale do Rio Doce, will spend $1.4 billion to build a giant coal mine at Moatize. Moatize contains at least 2.4 billion tonnes of coal and production could begin as soon as 2011. And there is enough coal in there to keep the mine going for the next 70 years. Mozambique’s economic boom could last for decades.

Vale is not alone though. Steel giant Arcelor-Mittal and India’s Tata Steel, which bought Anglo-Dutch steel company Corus, are both exploring for coal reserves in the country.

Boom times for Beira

And here is where it gets interesting for investors…

Getting that coal to market isn’t going to be easy though. The coal mines lie almost 600 miles west of the port from which it has to be shipped out. So to get it to market, Mozambique is spending a lot of money to revive the historic Beira Railway Project.

The railway connects the central Mozambican port city Beira with the Southern African railroad network through the Zambezi River Valley and Zimbabwe. Beira is Mozambique's second-biggest port after the capital, Maputo. And it has been a historical point of entry for shipments to landlocked Zimbabwe, Malawi and Zambia.

This is where Vale plans to ship its coal out from. So, $170 million is being spent to upgrade the rail link between the port and the coal mines. And the port is getting a major upgrade as well. $37 million is being spent on dredging the port so that it can cope with coal the vast amounts of coal that will be exported from here. And they plan on spending another $40 million to improve facilities the port as well.

Private companies have plans for hotels, offices and shopping centres…

Once the coal starts heading this way, this sleepy little corner of the Dark Continent looks set to become Africa’s latest boom town...

Owning a little patch of land smack in the centre of the city might turn out to be a very smart investment…

But this isn’t just about coal

But Beira’s boom isn’t just tied to the Moatize coal mine. This was the main trading port for landlocked Zimbabwe, Malawi and Zambia. So the port suffered a huge blow with the collapse of the Zimbabwean economy a decade ago.

Zimbabwe has been one of the saddest stories in Africa. It had everything it needed to profit from the record commodities in recent years. The country used to be a major agricultural exporter. And it’s sitting on the world’s second-biggest platinum reserves after South Africa. It has one of the most highly-skilled workforces in all of Africa.

Instead, Robert Mugabe’s land-grab in Zimbabwe ruined one of Africa’s strongest economies. And its impact has been felt across all the economies in the region.

But we have just seen a remarkable change in Zimbabwe yesterday. After a decade of political conflict, Robert Mugabe’s ZANU-PF and the opposition MDC party have finally reached a power-sharing agreement.

Now, anyone hoping that this is going to be a magic bullet for the country’s economic crisis is being naive. But the worst of the political crisis is probably over.

And as political stability slowly returns, I expect that we will see a strong rebound in the country’s economy. International aid could start flowing in huge amounts if they can make the political compromise work. And Zimbabwe could rapidly re-emerge as a commodities export powerhouse as commodities prices rebound.

Beira will be one of the biggest winners from Zimbabwe’s economic revival as trade begins to pick-up.
Here’s how to get your piece...

Playing this boom isn’t easy for the average investor though. The country’s Maputo Stock Exchange was set-up in 1999, but is so far off the beaten track that getting in is still practically impossible for foreigners.

You could get into this boom by showing up in Beira with a briefcase full of cash and try to snap-up prime waterfront properties. But we have found a much simpler way for you to get into this profit opportunity. To see that report, click here.

Best regards,

Manraaj Singh
For The Right Side

P.S. Manraaj Singh is Chief Investment Strategist of Profit Hunter an investment service focussed on off the beaten track profit opportunities from around the world. To find out more about Profit Hunter, click here.

It looks like global trade is picking up… but beware
BY FRANK HEMSLEY

We’ve looked at the Baltic Dry Index before. It assesses the price of moving major raw materials by sea. When the cost of shipping stuff is high, you know it’s in demand… so world trade is brisk… and the global economy is strong.

That’s not been the case recently. Tanker rates collapsed in 2008, tying in with the whole financial meltdown… and the weak global economy.

But on the face of it, at least, this chart shows something more exciting. This is the Baltic Capesize Index (BCI), which tracks the costs on the largest, “Capesize” ships. They typically carry coal and iron ore. When it’s strong, it’s a sign that steel is in demand. That points to an improvement in the world economy.

A massive rebound in shipping rates – but what’s behind it?

Specifically, the chart shows the BCI index has recovered about half of its losses from last year. This shows that last year’s weakness has made a significant reversal… and you could interpret this as a sign that the world economy is picking up.

But beware. If you look beyond the pretty picture, it’s not quite so rosy…

What it really shows is that people panicked last year. It reflects the fact that ship owners have “idled” a huge amount of capacity: the FT reports that the number of container ships taken out of service has quadrupled since the end of October. In other words, there are a huge number of ships just sitting around empty now.

So the uptick you can see on the chart has been driven by cutting down availability of ships, not growing demand for commodities or a revival of trade.

At the end of the day, China’s imports fell by 43% last month – the worst on record. That’s no sign of a global recovery…

The Daily Reckoning – What works in a panic
BY BILL BONNER

Poor Barack.

His whole presidency rests on getting this bailout thing right. If he does, he’ll be a hero. If he doesn’t, the economy will go into a Japan-like slump and he’ll spend his entire time in office dealing with people looking for handouts – zombie banks, comatose corporations, and desperate households.

Tim Geithner unveiled his new bank resuscitation machinery on Tuesday. He said it cost $2 trillion. Investors looked on... and saw the same old second-hand, worn-out rescue equipment the Bush team had used. The key tool is a pump that injects money into the banks, in the hope that if the bankers have a little more change lying around, they’ll be emboldened to lend it to someone.

But the banks aren’t going to lend... and neither is anyone else... as long as the value of the collateral is a) falling and/or b) unknown. This is a panic... at least that’s what it would have been called until 1929.

Yesterday, the Dow rose 50 points... a weak bounce, after such a big drop on Tuesday. Gold rose $30 (more below...) The pound fell some more (read on for a simple way to protect yourself...)

And oil slipped to only $35. Who would have thought? No one working at the Daily Reckoning! We knew oil had gotten ahead of itself... but we imagined that that price would fall only to $70 - $90 a barrel. It would be a correction, we reasoned, in a bull market. Instead, oil seems to have repudiated the whole ‘peak oil’ argument.

News this morning is that “US lawmakers agree on $789 billion stimulus plan,” according to Bloomberg. But that doesn’t seem to have reassured investors very much.

It’s a panic because people fear that the money they sent out to work for them may not be coming home again. As soon as the panic hit, they immediately got on the phone and tried to find it... trace its footsteps... wondering... worrying. Much of it will never come home. And even when it does make it home, it comes in the door with its clothes torn and bruises on its face.

To read the Daily Reckoning in full, click here.

P.S. If you enjoyed this article you can find out more about our free email, The Right Side by clicking here.

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Coal Mining Industry Is Set For Boom Times

Get Your Piece Of The Boomtown On The Edge Of The World