The advent of Indian mining companies onto the southeastern African state of Mozambique, with the intention of tapping into its vast coal reserves, is expected to transform the electricity exporting country into a regional powerhouse.

Last week the African Development Bank forecasted that investment in the exploration of Mozambique's extensive coal reserves and related energy projects would rise to US$30 billion in the next decade, according to a report by Macauhub.

Mozambique is expected to become the second biggest coal producer (after South Africa) with the development of the Moatize Project (which is being developed by Brazil's Vale) in 2010, it quotes Abdul Kamara, an energy specialist for the bank, as saying.

The bank also says coal production in Africa will increase on average by 3% per year by 2011, due particularly to increasing demand in Asian countries, adding that the importance of the dark commodity has been rising on the backdrop of escalating oil prices.

Coal has recently come back into fashion due to three advantages: lower prices per energy unit, higher reserves-to-production ratio, and a different geopolitical distribution of reserves, Kamara is quoted as saying.

But coal is fast becoming a hot property with Indian companies due to a number of reasons. Companies want to have a complete control on the supply of coal, which is essential in the development of the country's power plants, cement and steel units. Buying coal mines would ensure supplies and brings about supply security.

The companies also seek to protect themselves from the distortions caused by rising coal prices. Coal prices have more than doubled in the past three months to peak at US$350 a ton of coking coal.

According to some studies, India's power sector accounts for 75 to 80% of the country's total coal demand and coal requirements for power generation would rise to between 500 and 540 million tons by 2013, outstripping domestic supply by at least 55 to 60 million tons.

For Mozambique, however, a crusade for its coal resource - which was sparked by such giant mining multinationals as steelmaker Tata Steel and ArcelorMittal - has now also attracted smaller companies and investment funds that are after sources of the currently red-hot commodity that is in abundance in the country's Tete Province.

On Thursday this week, India's P K Ores Private Ltd. announced plans to acquire coal mines in the Tete province, as part of the Orissa based mining company's overseas expansion programme. The company said it had registered a new firm, Triveni P K Mining Company Ltd, in that country and hopes to acquire the mines under that banner soon, initially targeting a coal mine estimated to have a reserve of 25 million tons - its first overseas acquisition.

We have already applied to the ministry of coal and mines of the Mozambique government for coal mines and it is in final stages, Manas Ranjan Das Pattnaik, Director of P K Ores, was quoted as saying in a Business Standard report on Thursday.

Dangling a US$2.7-billion war chest, Coal Ventures International (CVI) - a special purpose vehicle created by five government-owned companies recently to acquire coal mines abroad - has also identified Mozambique as a primary destination for thermal coal assets.

It has identified two coal assets in that country, which could become its first acquisitions. Due diligence on the two assets has already been completed with one of the blocks offered found to have commercially exploitable coal reserves.

Similarly, BEML Midwest, a joint venture between Bharat Earth Movers, Midwest Granite and Sumber Mitra Jaya of Indonesia, announced last week that it has bought its first mine in Mozambique, with the aim of exporting production to India.

The company is currently working on defining the location of the coal seams with the aim of determining if the mine would be an open pit or an underground operation, Mukund Reddy, BEML Midwest's Chairman, was quoted as saying by the Indian press however that the start-up date was likely to be delayed by Mozambique's December to April rainy season.

Not to left out of the race for the Mozambican coal, Global Steel Holdings - the company that brings together the steel making shareholdings of the Ispat group - has also acquired two blocks for coal exploration in the country, as part of a US$116-million investment. The blocks, also in the Tete Province and close to the tenements owned by ArcelorMittal, Tata Steel and Vale, reportedly have proven reserves of over 70 million tons of coking coal.

Meanwhile, Tata Steel and ArcelorMittal - which have been exploiting the coal resource since last year - are busy extending their properties in Mozambique. Tata Steel recently acquired a 35% interest in two of Australian company Riversdale's key Mozambique exploration tenements, a transaction with an estimated value of US$88-million. According to Macauhub, ArcelorMittal recently acquired a 35% stake in a joint venture, Rio Minjova Mining and Exploration Company, for US$2.5-million.

Mozambique is the only place in the world that is not very much explored and where you can still get some cheap coking coal assets, Rakesh Arora, an analyst with Macquarie in Mumbai, is on record as having told Indian media recently.