The Last Great Coal Reserve In The World

Just about everywhere you look right now, markets are taking a beating…

But there are still a lot of top investment opportunities out there.

In fact, after the sell-offs that we have seen, you can get into some of the strongest growth stories for just a fraction of what it would have cost you just a few months ago.

But you are going to have to go off the beaten investment track to find the best opportunities right now.

That is why I have been telling members of my Profit Hunter investment service about one forgotten corner of Africa that is emerging as the world’s new energy hotspot.

You see, the former Portuguese colony of Mozambique is sitting on the Southern Hemisphere’s biggest coal reserves.

In fact, this may be the last great coal reserve in the world.

And demand for coal among energy companies and steel producers is soaring…

So those reserves are suddenly receiving a lot of attention.

The sums involved are huge...

And here at Profit Hunter, we have found a backdoor way to get a slice of the action.

The last great coal reserve in the world

Mozambique isn’t one of the first places that comes to mind when you start thinking about investment opportunities. But the former Portuguese colony on the east coast of Africa offers huge opportunities for savvy investors.

The Moatize basin in the country’s remote Tete province may be the last untapped great coal reserve in the world. Moatize holds an estimated 2.5 billion tonnes of coal. That’s enough to keep producing for decades to come. And demand is set to keep rising.

Coal is already the world’s biggest source of energy for electricity production. And it will be the second fastest growing source of energy after natural gas between now and 2030.

So there is a real investment opportunity here.

Just consider: China is building new coal-fired power plants at a rate of about one per week! And then there is India. Asia’s other giant plans on adding more than 400,000 Megawatts of new capacity by 2030 – and the bulk of that is going to be powered by coal. So, the coal story still has a long way to go.

Because coal isn’t just a vital source of energy. It is also crucial for the production of steel.

And that has attracted some of the world’s biggest companies.

The world’s biggest iron-ore producer has invested…

Brazilian steel giant, Vale do Rio Doce, will spend $1.4 billion to build a giant coal mine at Moatize. And production is set to begin by 2011. The mine is expected to produce 8.5 million tonnes of coking coal and 2.5 million tonnes of thermal coal a year. So it serves both the steel and energy industries.

That could eventually rise to as much as 40 million tonnes per year. And there is enough coal in there to keep the mine going for the next 25 years.

Vale is the world’s biggest iron-ore producer. It supplies more than a third of the world's iron-ore exports. So the sheer size of their investment in Moatize tells you how big a profit opportunity they have spotted here.

And so has the world’s biggest steel producer…

But Vale isn’t the only one trying to get its hands on Mozambique’s coal. Steel giant Arcelor-Mittal bought 35 per cent of the Rio Minjova company, which owns coal exploration rights in Tete. And it’s got the option to become the majority owner if exploration proves successful. Arcelor-Mittal is the world’s biggest steel company. It is controlled by Britain’s richest man – Lakshmi Mittal.

Then there is India’s Tata Steel. These are the chaps who bought Anglo-Dutch steel company Corus in 2006. Now it has teamed-up with Australia’s Riversdale Mining and is carrying out a feasibility study to produce coal from land on which it holds rights in Mozambique.

The last great coal reserve in the world

Why are all the giant’s suddenly piling-in to this African country?

Because the global steel giants need this stuff. And all that demand has sent the global price of coking coal used by steel producers tripling this year. And some Japanese utilities have just agreed to pay more than double what they did last year for Indonesian coal. The Japanese are desperate to get their share. And they’re joining in the rush for Mozambique’s coal as well.

In May, Nippon Steel, the world’s second-biggest maker of the metal, said that it wants to buy a stake in Vale’s Moatize mine. The Japanese company is being hit hard by rising material costs. So they’re trying to hold costs down by investing in mines directly.

This forgotten corner of the world is suddenly emerging as the new hotspot…

And there’s one simple reason for that. Moatize is probably the last great unexploited coal reserve in the world. And that means just one thing…

Boom times for Mozambique…

Mozambique is in the middle of an economic boom. In fact, the country has just had one its best years since it won independence in 1975. Absolutely no whiff of the sub-prime crisis here.

It pulled-in US$7.5 billion worth of foreign direct investment projects last year. The country is already home to the giant Mozal aluminium smelting plant – the second biggest in Africa. But what we are seeing with its coal reserves is on a totally different scale.

This is going to be a massive shot in the arm for Mozambique’s economy.

Getting that coal to market isn’t going to be easy though. The Moatize coal mines are out in the remote Tete province in the western part of the country…far from the ports from which it has to be shipped out.

So to get their coal onto the international market, Vale will transport the coal by rail to the eastern port of Beira. Beira is more than 600 kilometres away from the mines. And as far as most investors are concerned, it had might as well be on the edge of the world. But once the coal starts flowing, this port looks set to become Africa’s latest boom town...

The boomtown on the edge of the world

Beira was once one of the most important ports in Africa. And it is Beira is still Mozambique's second-biggest port after the capital, Maputo. The historic Beira railway connects the central Mozambican port city Beira with the Southern African railroad network through the Zambezi River Valley and Zimbabwe.

That made it the historical point of entry for shipments to landlocked Zimbabwe, Malawi and Zambia. The wealth of the Southern African hinterland flowed through this port. But then Mozambique was torn apart by a civil war in the 70s and 80s. And Zimbabwe’s economy has been gutted by Robert Mugabe’s “land reform.” And this great port city fell off the map.

But the civil war in Mozambique ended in 1992. And Zimbabwe’s economy looks set to turnaround now that the worst of the political crisis seems to be over. Beira should once more become the great trading centre for the wealth of the southern African hinterland. And most importantly, this where Vale plans to ship its coal out from.

So a huge amount of money is now being spent to revive the port. $170 million is being spent to upgrade the rail link between the port and the Moatize 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 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.

Beira is gearing up to reclaim its place as one of the great trading centres of the Indian Ocean.

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

But members of my Profit Hunter service are now invested in a small pan-African company that already operates in Beira. This company has been making a killing across Africa by buying-up undervalued infrastructure assets well ahead of the crowd.

Now it has taken control of a 300,000 m2 plot of prime land, including 1.5km of beach front, in central Beira through one of its investment companies. And it is building hotels, shopping centres, office blocks and apartments on that land. All the infrastructure that Beira needs if it going to become a major port again.

This is a chance to buy into a slice of prime property in this boomtown on the edge of the world.

You could get into this boom by showing up in Beira with a briefcase full of cash, but buying into this company is a much savvier way to get your piece of the action. And this company isn’t just a chance to buy into Beira’s boom. It owns one of the most important ports on the West Coast of Africa, it controls airlines, hotels and water bottling companies across Africa. And best of all, this company trades right here on the London Stock Exchange.

I have written a short report on this fantastic investment opportunity. If you like, you can take a look at it by clicking here.

Regards,

Manraaj Singh
Editor
Profit Hunter

P.S. If you enjoyed this article then we encourage you to sign up for Profit Hunter. Track down exciting opportunities in the worlds’ emerging markets and always stay ahead of the curve.

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The Last Great Coal Reserve In The World

Get Your Piece of the Boomtown on the Edge of the World