Coal is seen being transported in this file picture by Simphiwe Mbokazi.

Australia's Intra Energy Corporation (IEC) plans to invest $236 million in Tanzania's first privately funded coal mine and a coal-fired power plant to reduce nation's reliance on hydro power, its chairman told Reuters on Wednesday.

IEC Executive Chairman Graeme Robertson said mining was expected to begin in the coming week, with the first consignment of coal expected in September.

The mine was projected to expand its output to 500,000 tonnes a year by 2013 - with a long-term maximum output capacity of 5 million tonnes a year, he said.

IEC's local unit in east Africa's second largest economy, Tancoal Energy, had already spent $23 million on exploration and initial development costs of the Mbalawala mine, in the south-west of Tanzania, Robertson said.

“This investment will increase by some $93 million (in order) to increase the mining to a rate of up to 5 million tonnes per year,” Robertson said in an interview.

“We are currently meeting compensation payments this week and will commence proper mining next week ... The first shipments of coal will commence in September.”

He said the company would invest an additional $120 million in a coal-fired power plant near the mine.

“We have identified several possible sites for power stations near Mbalawala for 120 megawatts (MW) ... We are trying to fast-track this station with two 60MW units to be installed by end 2013,” said Robertson.

“The cost is approximately $1 million per MW or $120 million for the initial 120 MW at Mbalawala.”

Robertson said the company was also considering construction of a 400MW power plant in the southern Tanzanian town of Mbeya and another 400MW power station in the commercial capital, Dar es Salaam, between 2013/4 and 2017/8.

CHRONIC POWER SHORTAGES

The east African nation wants to spend $742 million by 2012 for emergency power projects aimed at ending chronic energy shortages, and intends to switch to thermal power sources such as coal.

This would wean the country off weather-dependent hydro power, which accounts for 55 percent of its electricity generation.

IEC owns 70 percent of the shares in Tancoal Energy, while the Tanzanian government holds the remaining stake through the state-run National Development Corporation (NDC).

The first stage of the mine development targets initial production of 10,000 tonnes per month, rising to 30,000 tonnes per month in 2012 and stabilising at 500,000 tonnes annually, the year after.

“The initial markets are (local) industrial markets such as Mbeya Cement and Tanga cement,” said Robertson

“Our combustion engineers have found strong interest from factories wanting to generate their own electricity with coal-fired generation because of the unreliability or lack of availability of electricity,” he said.

The Mbalawala mine is projected to substitute coal imports from South Africa and offset high costs associated with the shilling's depreciation, which has lost 9.8 percent this year.

Tanzania imports 250,000 tonnes of coal per year from South Africa.

The Tanzanian mine has a mineable reserve of 40 million tonnes of coal.

“Our exports commence this year to Malawi and we believe it is our role to support neighbouring countries with exports to Mombasa, Kenya and possibly Mauritius,” said Robertson. - Reuters