The government of Tanzania has awarded a coal mining licence to the local unit of Nigeria’s Dangote Cement as part of plans to lower the company’s production costs and ease disruptions caused by energy shortages.
The cement maker suspended output in December, citing technical problems and high production costs, but has since resumed making the building material.
“The process of allocating a coal mining area to the Dangote cement factory was completed on March 11,” Tanzania’s energy and minerals ministry said in a statement on Monday.
“The company (Dangote) will be given a (coal mining) licence covering 9.98 square kilometres in the Ngaka area.”
The cement factory in the southeastern Tanzanian town of Mtwara, with an annual capacity of 3 million tonnes, runs on expensive diesel generators and has sought government support to reduce costs.
Last week, Tanzanian President John Magufuli gave government officials a seven-day ultimatum to allocate a coal mining area to Dangote within the mineral-rich Ngaka coal fields, which are licensed to another company.
The Ngaka coal basin in southern Tanzania, an area covering more than 840 square kilometres, is licensed to Tancoal Energy Ltd, a subsidiary of Intra Energy Corp, which is listed on the Australian Stock Exchange.
Intra Energy said it would work with authorities to hand over part of its licensed coal mining area to Dangote, but raised concern about what it called “special treatment” being given to the Nigerian cement maker by the Tanzanian government.
The Australian coal miner owns a 70 percent stake in Tancoal Energy, with the remaining 30 percent held by National Development Corp, a Tanzanian public investment firm.
Magufuli also ordered state-run Tanzania Petroleum Development Corp (TPDC) to supply Dangote Cement with natural gas with immediate effect.
Previous talks on gas supply had stalled because Dangote Cement wanted “at-the-well” prices for natural gas, according to TPDC.
Dangote, Africa’s biggest cement producer, has an annual production capacity of 43.6 million tonnes. It targets output of between 74 million and 77 million tonnes by the end of 2019 and 100 million tonnes of capacity by 2020.
In Tanzania, Dangote wants to double the country’s annual output of cement to 6 million tonnes.