Colombia’s Carare railway moves forward

[John Ashworth]

Colombia’s Carare railway moves forward

09 Feb 2012 13:46 GMT
argus

Bogota, 9 February (Argus) – Brazilian industrial group Votorantim, which owns the controlling stake in Colombia's largest steel company Acerias Paz del Rio, has agreed to participate in the development of the 470km Carare railway.

The company has promised to produce and transport half of the rail's 20mn t capacity, Corpocarare general manager Jose Gabriel Taboada said. Votorantim produces about 10mn t of mostly metallurgic coal for the export market. Corpocarare is the entity responsible for promoting the project.

The Carare project will move forward with prefeasibility studies, Taboada said.

“With the arrival of Votorantim, we will be able to meet the 20mn t in output from the interior of the country. The ramp-up of coal mines from the interior will now be feasible,” Taboada said on the sidelines of a coal conference organised by Colombia's coal federation Fenalcarbon.

Votorantim owns one of the country's largest reserves of metallurgic coal. Three years ago, the company said it had 160mn t on 38,000 hectares (380km²) in the country's interior department of Boyaca.

The company is one of a few coal producers operating in the interior which could help finance Carare — via a ship-or-pay agreement — which will originate in the coal-rich area of Lenguazaque and another stretch in Duitama and ending at a river terminal near the city of Barrancabermeja. The Carare line will merge with the existing Central Railway in La Vizcaina, Santander province. The project is estimated to cost $1.5bn and is expected to begin operations in 2016 or 2017.

“The interior provinces of Cundinamarca, Boyaca and Santander currently produce 7mn t of coal but the expansion of metallurgic coal mines and the boost of coke output would easily bring that output to 20mn t by 2016 when the Carare railway is expected to be ready,” Taboada said.

Corpocarare and Votorantim expect to submit the government prefeasibility studies in March, which could allow them to rehabilitate and obtain a concession in the Central Railway.

“The contractor [could] run a complete system including building the new railway between highlands [of Boyaca and Cundinamarca] and an existing railway, which is the Central railway,” Taboada said.

The government will decide whether to grant the concession of the Central Railway to Corpocarare or invest a 20pc stake in the Carare railway to open an international bidding process on the rehabilitation of the Central Railway and construction of the new line.

The project is a key initiative for coking coal miners that use trucks to transport coal across 1,000km of mountainous roads to Caribbean ports. Coking coal producers pay around $54/t to transport coal from the inland state of Cundinamarca to Barranquilla. The rail route could cut costs to about $25/mt.