The dispute at the mine in Rustenburg, 120 km (70 miles)
northwest of Johannesburg, adds to growing labour tensions
around South Africa’s platinum belt, which are set to intensify
over looming job cuts and wage talks in the sector.

“The workforce downed tools, embarking on a strike which
entered its second day on Friday. It was declared an illegal
work stoppage by a court interdict (order) issued on Friday,”
the company said in a statement.

“The interdict ordered employees to report for work with
immediate effect. However, most of the workforce has not
complied with the order.”

The company said the workers, who are members of the
National Union of Mineworkers (NUM), were entitled to a
production-based bonus scheme, but were not eligible to payments
under any other plans.

Mxhasi Sithethi, the union’s regional co-ordinator for
Rustenburg, said the situation around the mine had been tense on
Friday, although there were no reports of violence.

“We are trying to persuade workers to go back,” he said.

The union will be in talks with the workers and the company
on Monday to find a solution to the dispute, he added.

LABOUR STRIFE

Rustenburg, the centre of South Africa’s platinum belt and
home to 80 percent of known global platinum reserves, has over
the past year become the flashpoint of violent labour strife and
a turf war between the NUM and the more militant Association of
Mineworkers and Construction Union (AMCU).

More than 50 people were killed in labour-related violence
last year amid a wave of wildcat strikes that hit production in
the platinum and gold sectors, and there are concerns that there
could be more unrest after Anglo American Platinum
announced plans to cut 6,000 mining jobs around Rustenburg.

That is less than half the 14,000 initially targeted by the
world’s top producer of the precious metal as it seeks to
restore profits, but unions have still vowed to fight the
lay-offs. However, a protest strike called for Friday by at
least two AMCU officials failed to materialise.

Upcoming wage talks in South Africa’s mining sector are also
expected to be difficult given inflation, rising worker
militancy, shrinking company margins and sharply falling
commodity prices. The platinum price lost nearly 20
percent in the last two years.

AMCU’s leader on Friday threatened to bring Africa’s biggest
economy to a standstill, ramping up the rhetoric in the 18-month
labour crisis, while the rand fell to a four-year low against
the dollar this week on concerns about further disruptions to an
already struggling economy.

The growing tensions have put pressure on President Jacob
Zuma’s African National Congress (ANC), which was criticised for
its handling of last year’s turmoil and faces accusations that
it is neglecting the poor 19 years after the end of apartheid.

(Editing by David Holmes)

The dispute at the mine in Rustenburg, 120 km (70 miles)
northwest of Johannesburg, adds to growing labour tensions
around South Africa’s platinum belt, which are set to intensify
over looming job cuts and wage talks in the sector.

“The strike is still ongoing, although we are trying to
persuade workers to go back,” said Mxhasi Sithethi, the union’s
regional co-ordinator for Rustenburg.

“The company issued a court injunction yesterday calling the
workers to go back to work, but the employees reacted angrily.”

Sithethi said the situation around the mine had been tense
on Friday, although there were no reports of violence. The union
will be in talks with the workers and the company’s management
on Monday to find a solution to the dispute.

The company could not be reached for comment.

Rustenburg, the centre of South Africa’s platinum belt and
home to 80 percent of known global platinum reserves, has over
the past year become the flashpoint of violent labour strife and
a turf war between the NUM and the more militant Association of
Mineworkers and Construction Union (AMCU).

More than 50 people were killed in labour-related violence
last year amid a wave of wildcat strikes that hit production in
the platinum and gold sectors, and there are concerns that there
could be more unrest after Anglo American Platinum
announced plans to cut 6,000 mining jobs around Rustenburg.

That is less than half the 14,000 initially targeted by the
world’s top producer of the precious metal as it seeks to
restore profits, but unions have still vowed to fight the
lay-offs. However, a protest strike called for Friday by at
least two AMCU officials failed to materialise.

Upcoming wage talks in South Africa’s mining sector are also
expected to be difficult given inflation, rising worker
militancy, shrinking company margins and sharply falling
commodity prices. The platinum price lost nearly 20
percent in the last two years.

AMCU’s leader on Friday threatened to bring Africa’s biggest
economy to a standstill, ramping up the rhetoric in the 18-month
labour crisis, while the rand fell to a four-year low against
the dollar this week on concerns about further disruptions to an
already struggling economy.

The growing tensions have put pressure on President Jacob
Zuma’s African National Congress (ANC), which was criticised for
its handling of last year’s turmoil and faces accusations that
it is neglecting the poor 19 years after the end of apartheid.

(Editing by David Holmes)

Foreign mining companies are betting in Mozambique on one of the world’s largest untapped reserves of premium hard coking coal relatively close to Africa’s east coast, a prime location for feeding hungry markets in Asia.

But they have run into a problem facing many minerals exporters across Africa. “If you can’t take those goods to the market, you are wasting your time,” said Sipho Nkosi, CEO of South African coal producer Exxaro, explaining the difficulties experienced by many such projects on the continent.

Tens of millions of dollars have poured into the only rail link between Mozambique’s remote coal fields and the port of Beira, its export gateway. But despite the upgrades, heavy rains flooded parts of the Sena line in February, paralysing exports.

Brazil’s Vale declared “force majeure” on coal shipments due to the two-week shutdown, invoking clauses in supply contracts covering disruptions beyond its control. A mine run by the Anglo-Australian Rio Tinto group also ground to a halt, leaving rows of empty railway wagons at Dondo, about 20 km (12 miles) from Beira.

About $20 billion (13 billion pounds) is needed to revive Mozambique’s railways and ports, industry leaders estimate, a massive cost for a country the United Nations lists as the third poorest on earth.

While Vale is spending heavily on a separate line to the northern coast, rail investments have generally fallen short of needs so far. A concession deal to bring the Sena line back into full operation fell short of expectations and infrastructure development is generally slow, lagging the coal mining bonanza.

Mozambique’s government insists that any infrastructure development projects also serve other uses such as non-coal cargo, shipments from neighbouring states and passengers.

“We are not building infrastructure just for coal,” Transport Minister Paulo Zucula told Reuters.

Much is at stake for the former Portuguese colony where the average annual per capita income is just over $400. The government is counting on mining and new transport routes to boost economic growth and create jobs, in coal and elsewhere.

WAKE-UP CALL

Rio Tinto’s January announcement of a $3 billion write-down on the value of its Mozambican assets, partly due to problems of getting coal to port, was a wake-up call to the mining firms and the government. They worry that buyers of coking coal may turn to other markets if Mozambican supply is held up.

With coking coal markets over-supplied due to lower demand from steel mills and higher domestic production in China, the delays may favour the mining firms in the short term. They hope prices will have recovered to highs hit in 2011 by the time they can export Mozambican coal in greater quantities.

A Japanese steelmaker, asking not to be named, said the delays were part of the price his firm was willing to pay for the high-quality Mozambican coal. Mills in India, a target market for Mozambique, have said they expect coal from there to be available by the time global supply tightens again.

But as in Guinea, Democratic Republic of Congo and Africa’s biggest economy, South Africa, the same question hangs over Mozambique’s need to link its mines to its ports: who will invest the billions of dollars needed for railways and terminals and who will control them once they are running?

At one stage the government asked mining companies to commit themselves contractually to specific planned shipments so it could use this to obtain the billions of dollars of financing needed for infrastructure. Many firms declined.

Investors are sceptical too about Mozambique’s promise that it will be able to move up to 120 million tonnes of coal per year – a sixth of the global steel industry’s demand – by 2020.

“This is an annoying poker game in which every side wants the other to do something without committing,” said Joseph Hanlon, a senior lecturer at Britain’s Open University and an expert on Mozambique.

FLAWED REPAIRS

When Vale and others arrived in 2004, the Sena railway had not run for over a decade. Uprooted at various points by rebels during the 1975-1992 civil war, parts of it lay twisted and ruined, trees sprouting between the tracks.

The job of repairing the 600 km (375 mile) line, backed by a $110 million World Bank loan, was given to a consortium of two Indian firms and Mozambique’s national logistics group CFM.

In 2011, the Mozambican state took the concession from the Indian firms when they failed to deliver after many delays and gave control to CFM. The firms called this “economic terrorism” and plan to take the government to court.

The World Bank said in a report last year that the line, “while operational, was delivered two years late and requires significant further work to be able to carry the current traffic safely and sustainably”. It assessed the rehabilitation project as “unsatisfactory”.

Nearly a decade after the World Bank loan, the Sena line carried only around 3 million tonnes of coal last year, less than half of what was projected.

Some sections are in a better state, but trains run at a snail’s pace and drivers have to change points manually.

Relying on roads is too expensive, with the narrow highway between the mines in Tete province and Beira congested with trucks. The bottlenecks extend to ports: constant silting and shifting sandbanks require daily dredging at Beira, making it difficult for large vessels to pass.

PRIVATE CAPITAL

With a gross domestic product of just under $13 billion, Mozambique says the private sector must find the billions required to fund infrastructure development. But recent drops in coal prices are making financiers cautious.

“You have less value for minerals, less capital, which is compounded by the lack of decisions regarding the completion of the infrastructure to get the coal out,” said Stephan Morais, deputy CEO at Mozambican investment bank BNI.

Eurasia Group Africa analyst Mark Rosenberg said not only did CFM suffer from its own management problems, but the entity was “a channel for the political and commercial interests of President (Armando) Guebuza and senior members of the ruling Frelimo party, introducing further inefficiencies”.

Guebuza’s nephew is on CFM’s board and the family is a shareholder in Cornelder de Mocambique, which manages Beira port. Guebuza ally Celso Correia heads investment group Insitec, which sold a concession on the Nacala rail line to Vale.

CFM spokesman Alves Cumbe declined to respond to Rosenberg’s allegations. “I will speak about the railway lines, but about third party interests, I have no comment,” he said. No one was immediately available to comment at the presidency.

Rio Tinto, whose initial plan to carry coal by barge down the Zambezi river was rejected on environmental grounds, irritated the government by insisting on a self-owned and self-operated railway.

“They wanted an exclusive line, just for Rio Tinto,” Zucula said. “Mozambique doesn’t work on those principles.”

Rio Tinto declined to comment on its discussions with the government. It is now among six preferred bidders for a new $3 billion multi-user railway and port development project, while Vale is ploughing $4.4 billion into revamping and extending an open-access railway line and a deep-water port at Nacala.

CFM says it will soon set up an independent operator to manage the various rail lines, while rates and access will be administered by a state regulator.

“We adopt the same attitude appropriate in looking for a spouse: it pays to be active, interested and open-minded, but it does not pay to be in a hurry,” said CFM’s head Rosario Mualeia, quoting billionaire U.S. investor Warren Buffet.

(Additional reporting by James Topham in Tokyo; Editing by Pascal Fletcher and David Stamp)

Foreign mining companies are betting in Mozambique on one of
the world’s largest untapped reserves of premium hard coking
coal relatively close to Africa’s east coast, a prime location
for feeding hungry markets in Asia.

But they have run into a problem facing many minerals
exporters across Africa. “If you can’t take those goods to the
market, you are wasting your time,” said Sipho Nkosi, CEO of
South African coal producer Exxaro, explaining the difficulties
experienced by many such projects on the continent.

Tens of millions of dollars have poured into the only rail
link between Mozambique’s remote coal fields and the port of
Beira, its export gateway. But despite the upgrades, heavy rains
flooded parts of the Sena line in February, paralysing exports.

Brazil’s Vale declared “force majeure” on coal
shipments due to the two-week shutdown, invoking clauses in
supply contracts covering disruptions beyond its control. A mine
run by the Anglo-Australian Rio Tinto group also ground
to a halt, leaving rows of empty railway wagons at Dondo, about
20 km (12 miles) from Beira.

About $20 billion is needed to revive Mozambique’s railways
and ports, industry leaders estimate, a massive cost for a
country the United Nations lists as the third poorest on earth.

While Vale is spending heavily on a separate line to the
northern coast, rail investments have generally fallen short of
needs so far. A concession deal to bring the Sena line back into
full operation fell short of expectations and infrastructure
development is generally slow, lagging the coal mining bonanza.

Mozambique’s government insists that any infrastructure
development projects also serve other uses such as non-coal
cargo, shipments from neighbouring states and passengers.

“We are not building infrastructure just for coal,”
Transport Minister Paulo Zucula told Reuters.

Much is at stake for the former Portuguese colony where the
average annual per capita income is just over $400. The
government is counting on mining and new transport routes to
boost economic growth and create jobs, in coal and elsewhere.

WAKE-UP CALL

Rio Tinto’s January announcement of a $3 billion write-down
on the value of its Mozambican assets, partly due to problems of
getting coal to port, was a wake-up call to the mining firms and
the government. They worry that buyers of coking coal may turn
to other markets if Mozambican supply is held up.

With coking coal markets over-supplied due to lower demand
from steel mills and higher domestic production in China, the
delays may favour the mining firms in the short term. They hope
prices will have recovered to highs hit in 2011 by the time they
can export Mozambican coal in greater quantities.

A Japanese steelmaker, asking not to be named, said the
delays were part of the price his firm was willing to pay for
the high-quality Mozambican coal. Mills in India, a target
market for Mozambique, have said they expect coal from there to
be available by the time global supply tightens again.

But as in Guinea, Democratic Republic of Congo and Africa’s
biggest economy, South Africa, the same question hangs over
Mozambique’s need to link its mines to its ports: who will
invest the billions of dollars needed for railways and terminals
and who will control them once they are running?

At one stage the government asked mining companies to commit
themselves contractually to specific planned shipments so it
could use this to obtain the billions of dollars of financing
needed for infrastructure. Many firms declined.

Investors are sceptical too about Mozambique’s promise that
it will be able to move up to 120 million tonnes of coal per
year – a sixth of the global steel industry’s demand – by 2020.

“This is an annoying poker game in which every side wants
the other to do something without committing,” said Joseph
Hanlon, a senior lecturer at Britain’s Open University and an
expert on Mozambique.

FLAWED REPAIRS

When Vale and others arrived in 2004, the Sena railway had
not run for over a decade. Uprooted at various points by rebels
during the 1975-1992 civil war, parts of it lay twisted and
ruined, trees sprouting between the tracks.

The job of repairing the 600 km (375 mile) line, backed by a
$110 million World Bank loan, was given to a consortium of two
Indian firms and Mozambique’s national logistics group CFM.

In 2011, the Mozambican state took the concession from the
Indian firms when they failed to deliver after many delays and
gave control to CFM. The firms called this “economic terrorism”
and plan to take the government to court.

The World Bank said in a report last year that the line,
“while operational, was delivered two years late and requires
significant further work to be able to carry the current traffic
safely and sustainably”. It assessed the rehabilitation project
as “unsatisfactory”.

Nearly a decade after the World Bank loan, the Sena line
carried only around 3 million tonnes of coal last year, less
than half of what was projected.

Some sections are in a better state, but trains run at a
snail’s pace and drivers have to change points manually.

Relying on roads is too expensive, with the narrow highway
between the mines in Tete province and Beira congested with
trucks. The bottlenecks extend to ports: constant silting and
shifting sandbanks require daily dredging at Beira, making it
difficult for large vessels to pass.

PRIVATE CAPITAL

With a gross domestic product of just under $13 billion,
Mozambique says the private sector must find the billions
required to fund infrastructure development. But recent drops in
coal prices are making financiers cautious.

“You have less value for minerals, less capital, which is
compounded by the lack of decisions regarding the completion of
the infrastructure to get the coal out,” said Stephan Morais,
deputy CEO at Mozambican investment bank BNI.

Eurasia Group Africa analyst Mark Rosenberg said not only
did CFM suffer from its own management problems, but the entity
was “a channel for the political and commercial interests of
President (Armando) Guebuza and senior members of the ruling
Frelimo party, introducing further inefficiencies”.

Guebuza’s nephew is on CFM’s board and the family is a
shareholder in Cornelder de Mocambique, which manages Beira
port. Guebuza ally Celso Correia heads investment group Insitec,
which sold a concession on the Nacala rail line to Vale.

CFM spokesman Alves Cumbe declined to respond to Rosenberg’s

allegations. “I will speak about the railway lines, but about
third party interests, I have no comment,” he said. No one was
immediately available to comment at the presidency.

Rio Tinto, whose initial plan to carry coal by barge down
the Zambezi river was rejected on environmental grounds,
irritated the government by insisting on a self-owned and
self-operated railway.

“They wanted an exclusive line, just for Rio Tinto,” Zucula
said. “Mozambique doesn’t work on those principles.”

Rio Tinto declined to comment on its discussions with the
government. It is now among six preferred bidders for a new $3
billion multi-user railway and port development project, while
Vale is ploughing $4.4 billion into revamping and extending an
open-access railway line and a deep-water port at Nacala.

CFM says it will soon set up an independent operator to
manage the various rail lines, while rates and access will be
administered by a state regulator.

“We adopt the same attitude appropriate in looking for a
spouse: it pays to be active, interested and open-minded, but it
does not pay to be in a hurry,” said CFM’s head Rosario Mualeia,
quoting billionaire U.S. investor Warren Buffet.

(Additional reporting by James Topham in Tokyo; Editing by
Pascal Fletcher and David Stamp)

The former Portuguese colony, which emerged from civil war
two decades ago, boasts some of the world’s largest untapped
coal reserves and is expected to become a key source of
sought-after premium, hard coking coal used in steel making.

Infrastructure bottlenecks have become a major headache for
mining companies in Mozambique’s coal-rich Tete province, with
some projects delayed or put on hold due to problems of getting
coal to port.

Rio Tinto wrote down $3 billion of its Mozambican assets in
January, partially because of infrastructure constraints.
Winning the bid could be a major boost for its project.

“We had 21 companies in the pre-selection phase and we have
selected six preferred bidders, who are now preparing their full
bids,” Transport Minister Paulo Zucula told Reuters by phone.

Apart from Rio Tinto, mostly logistics companies were among
the final six, with a winner to be chosen by July, Zucula said.

The tender is for a 525 kilometre (325-mile) rail line from
Tete province to Macuse, in Mozambique’s Zambezia province, and
for a new port able to initially handle 25 million tonnes of
cargo per year, with a potential to double that in the future.

Brazilian mining giant Vale is investing $4.4
billion to revamp another, much longer railway line from Tete
province to the deep-water port at Nacala via Malawi.

MULTI-USER

The winner will be required to source the funds, and will
also have to transport non-coal cargo and passengers, given
needs to boost growth in a country where more than half live
below the national poverty line of around $0.65 a day.

“We are not building infrastructure just for coal,” Zucula
said. “We are not like Australia that already has infrastructure
for everybody and can then dedicate infrastructure for a
specific commodity. It’s not our case.”

Current transport is limited to the Sena line, the only
railway linking the coal-rich Moatize basin with the Beira port,
and Zucula said a much-delayed upgrade of the line to 6 million
tonnes from 3 million last year has finally been completed.

A further upgrade to 20 million tonnes on that same line is
scheduled for completion within 18 to 20 months, he added.

“By the end of 2015 we will have a total coal export
capacity of more than 30 million tonnes,” he added.

Zucula said he did not foresee any problems in companies
sourcing funds to pay for the infrastructure, but he expressed
concern that delays may force some steel producers, especially
from Asia, to source their coking coal from elsewhere.

“In terms of timing, I am really concerned, so that’s why we
are pushing,” he said.

Exxaro’s chief executive Sipho Nkosi told the Reuters Africa Investment Summit he was optimistic it would soon get a permit to begin production at the Mayoko project.

“We will get our mining convention and start mining this year,” he said.

South Africa’s second largest coal producer acquired the project as part of its A$313 million ($328.10 million) takeover of African Iron in an effort to diversify from coal, which has been hit by sharp drops in prices and demand.

Exxaro plans to spend $320 million in the initial ramp up of the mine, with a view to producing up to 2 million metric tons by next year, Nkosi said. Exxaro aims to eventually mine 10 million metric tons of the steel making ingredient per year, although Nkosi declined to give a date for when that would happen.

Mayoko’s success depends on clearing bureaucratic hurdles and securing access to transport links and a port.

Nkosi said officials in Congo right up to the president were very accessible, but there were challenges to breaking ground in a country new to the mining game.

“It is a learning curve for the country, for any investor. Once we have gone through that loop, anyone who comes after us is probably going to find things much easier,” he said.

Nkosi said Exxaro would invest in upgrading a railway line leading to the deep-water port at Pointe Noire to handle 2 million metric tons of cargo per year and will manage the line jointly with the government.

He declined to comment on whether Exxaro would be interested in buying Equatorial Resources, which has a project adjacent to Mayoko, but he did say that the two companies often talked about a possible collaboration, notably in infrastructure.

CRUMBLING COAL

A sharp drop in coal prices and lower export volumes hit Exxaro’s earnings last year and it expects the outlook for that industry to remain challenging.

Nkosi said the group was keen to invest in new coal mines in South Africa, the continent’s biggest economy, where some 85 percent of the electricity generated by power utility Eskom is based on coal, but the timing of any project would depend on demand, prices, the regulatory environment and infrastructure.

“We will spend a significant amount of money, there are big projects that we are looking at,” Nkosi said, mentioning the Thabametsi mine, which could supply coal to a plant run by an independent power producer, and underground coal gasification.

Lack of sufficient capacity on railway lines leading to the export terminals at the coast has been a major hurdle for South Africa’s miners. Nkosi said state-owned logistics group Transnet should allow private firms to invest in railway links and ports.

“If you can’t take those goods to the market, you are wasting your time. So logistics is critical and that is where we have failed to take advantage of the high commodity prices that we have seen in the last seven to 10 years, because the infrastructure has always been bad,” he said. (Follow Reuters Summits on Twitter @Reuters_Summits) ($1 = 8.9203 South African rand) ($1 = 0.9540 Australian dollars)

(For other news from Reuters Africa Investment Summit, click here)

(Additional reporting by Benon Oluka and Tiisetso Motsoeneng; Editing by Ed Stoddard and Louise Heavens)

Agreeing on the share of funding contributions for the BRICS bank from each of the members – Brazil, Russia, India, China and South Africa – had already been a thorny issue for a group which brings together vastly disparate economies and governments.

They want to set up their own development bank to reduce their reliance on Western financial institutions.

“There is positive movement, but there is no decision on the creation of the bank,” Russian Finance Minister Anton Siluanov said after finance ministers met before a formal summit of the BRICS heads of state in the port of Durban.

BRICS leaders would seek to maintain momentum by including a reference to the bank in their final summit communique.

“Instructions will be given to speed up the process,” Siluanov said, adding the finance ministers would tackle the issues again in April at a G20 meeting.

The five countries represent a fifth of global GDP and share high growth and geopolitical importance in their separate regions, but have struggled to find common ground that would convert their economic weight into joint political clout.

The two biggest economies of the group, China and Brazil, marked their determination to make changes in the world’s trade and financial architecture by signing a three-year currency swap agreement covering up to $30 billion a year in bilateral trade.

Brazilian officials said the aim was to ensure their fast-growing commercial ties would not suffer if a new banking crisis caused dollar trade finance to dry up.

“Our interest is not to establish new relations with China, but to expand relations to be used in the case of turbulence in financial markets,” Brazilian Central Bank Governor Alexandre Tombini told reporters after the signing.

Brazil’s mineral resources and farm products have helped fuel China’s industrial growth and feed its people while bringing prosperity to the Latin American giant.

Bilateral trade totalled around $75 billion last year, with Brazil selling iron ore, soy products and crude oil, and buying Chinese machinery, electronics and manufactured goods.

RESERVES POOL PLANS

Brazilian officials have said they hope to have the trade and currency deal operating in the second half of 2013.

“If there were shocks to the global financial market, with credit running short, we’d have credit from our biggest international partner, so there would be no interruption of trade,” said Economy Minister Guido Mantega.

At the Durban summit, the group’s fifth since 2009, the BRICS leaders were also expected to endorse plans to create a joint foreign exchange reserves pool.

The proposed development bank and reserves pool reflect frustration among emerging nations at having to rely on the World Bank and International Monetary Fund, which some see as reflecting the interests of rich nations.

The reserves pool of central bank money would be available to emerging economies facing balance of payments difficulties or could be tapped to stabilise economies during crises, according to documents obtained by Reuters outlining it.

Officials had said BRICS states aimed to inject an initial $50 billion into a new infrastructure bank, but there was disagreement over whether each should contribute $10 billion or if contributions should vary by the size of their economies.

China’s economy is about 20 times the size of South Africa’s and four times as big as Russia’s or India’s.

The bank would support financing needs in emerging and developing nations for roads, ports, power and rail services.

The BRICS leaders were also due to discuss economic ties with Africa, at a time when many on the continent are seeking more balance and a different focus in trade and investment, especially from China.

New Chinese President Xi Jinping is attending on his first visit as head of state to Africa. In Tanzania on Monday, Xi told Africans he wanted a relationship of equals that would help the continent develop, responding to concerns that Beijing is only interested in its raw materials. (Additional reporting by Peter Murphy in Sao Paulo; Writing by Pascal Fletcher; Editing by Jon Herskovitz and Peter Graff)

The three-year agreement, signed before the start of a BRICS
nations summit in Durban, South Africa, marked a step by the two
largest economies in the emerging powers group to change global
trade flows long dominated by the United States and Europe.

Brazil, Russia, India, China and South Africa represent
together a fifth of global GDP but have struggled to convert
their economic weight into political clout in the international
arena.

“Our interest is not to establish new relations with China,
but to expand relations to be used in the case of turbulence in
financial markets,” Brazilian Central Bank Governor Alexandre
Tombini told reporters after the signing.

Brazilian Economy Minister Guido Mantega described the deal,
called a bilateral currency swap accord, as “a sort of umbrella
agreement” but he did not spell out what specific areas or
categories of trade would be affected.

Brazil’s vast mineral resources and agricultural products
have helped fuel China’s industrial growth and feed its people
while the returns have helped bring a new era of prosperity to
the Latin American giant.

Bilateral trade totaled around $75 billion last year. Of
Brazil’s $41.2 billion exports to China, iron ore accounted for
34 percent, while soy and soy products made up 29 percent and
crude oil 12 percent.

Electronics, machinery and manufactured goods figured
heavily in Brazil’s $34.2 billion of imports from China.

Brazilian officials have said they hope to have the trade
and currency deal operating in the second half of 2013.

Mantega said it would act as a buffer against turbulence in
international financial markets dominated by the U.S. dollar.

“If there were shocks to the global financial market, with
credit running short, we’d have credit from our biggest
international partner, so there would be no interruption of
trade,” he said.

Chinese officials at the signing made no comments but the
People’s Bank of China said on its website the currency swap
agreement was worth 190 billion yuan ($30.6 billion) and would
facilitate trade and investment.

“SOME PROGRESS” ON BRICS BANK

At the Durban summit, the group’s fifth since 2009, the
heads of state of Brazil, Russia, India, China and South Africa
are expected to endorse plans to create a joint foreign exchange
reserves pool and an infrastructure bank.

These objectives reflect frustration among emerging market
nations at having to rely on the World Bank and International
Monetary Fund, which they see as still reflecting the interests
of the United States and other rich nations.

The reserves pool of central bank money would be available
to emerging economies facing balance of payments difficulties or
could be tapped to stabilize economies during periods of global
financial crises, according to documents outlining the plan that
were obtained by Reuters.

Officials say the BRICS are considering injecting an initial
$50 billion into the new infrastructure bank. But the specifics
of the scale, location and structure of the institution were
still being thrashed out.

“It’s a huge job with a lot of difficult issues to be agreed
on. In principle, there is some progress,” Russian Deputy
Finance Minister Sergey Anatolyevich Storchak told Reuters.

The bank would support the ever-growing financing needs in
emerging and developing nations for roads, modern ports, and
reliable power and rail services.

The BRICS leaders were also due to discuss trade and
investment relations with Africa, at a time when many on the
economically buoyant continent are seeking more balance and a
different focus in trade and investment, especially from the
giant of the group, China.

South African President Jacob Zuma on Tuesday welcomed new
Chinese President Xi Jinping, who is making his first visit as
head of state to Africa.

In Tanzania on Monday, Xi told Africans he wanted a
relationship of equals that would help the continent develop,
responding to concerns that Beijing is only interested in
exploiting its abundant raw materials.
($1 = 6.2107 Chinese yuan)
($1 = 9.2946 South African rand)

(Additional reporting by Peter Murphy in Sao Paulo; Writing by
Pascal Fletcher; Editing by Jon Herskovitz and Angus MacSwan)

The agreement, due to last three years and signed hours
before the start of a BRICS summit in Durban, South Africa,
marked a step by the two largest economies of the emerging
powers group to make real changes to global trade flows long
dominated by the United States and Europe.

“Our interest is not to establish new relations with China,
but to expand relations to be used in the case of turbulence in
financial markets,” Brazilian Central Bank Governor Alexandre
Tombini told reporters after the signing.

Brazilian Economy Minister Guido Mantega described the deal,
called a bilateral currency swap accord, as “a sort of umbrella
agreement” but he did not spell out what specific areas or
categories of bilateral trade would be affected.

Trade between the two countries totalled around $75 billion
in 2012. Brazilian officials have said they hope to have the
trade and currency deal operating in the second half of 2013.

Nearly half of Brazil’s exports to China consist of iron ore
and related products, while soy and soy products make up about a
fifth of these exports. China’s biggest exports to Brazil are
electronics and machinery.

Mantega said the trade and currency agreement would act as a
buffer against turbulence in international financial markets
dominated by the U.S. dollar.

“If there were shocks to the global financial market, with
credit running short, we’d have credit from our biggest
international partner, so there would be no interruption of
trade,” he added.

Tombini said the currency swap agreement would not affect
Brazil’s international reserves, as neither the Brazilian real
nor the Chinese yuan were used for such reserves.

“This contract has a three-year life and can be renewed,” he
added.

Chinese officials present at the signing did not make
comments to reporters but the People’s Bank of China announced
on its website the bilateral currency swap agreement worth 190
billion yuan ($30.6 billion). It called it the latest move to
facilitate trade and investment between the two countries.

At the BRICS summit in Durban, the fifth held by the group
since 2009, Brazil, Russia, India, China and South Africa are
widely expected to endorse plans to create a joint foreign
exchange reserves pool and an infrastructure bank. They are also
due to discuss trade and investment relations with Africa.

The state-run utility, which needs to generate cash to build
new power stations to meet rising demand in Africa’s biggest
economy, has been trying to renegotiate the long-term deal with
BHP since 2009.

Under the deal, which runs until 2028, BHP pays 23 South
African cents per kilowatt hour (kWh) compared to the 41 cents
it costs to produce, the Afrikaans-language Beeld newspaper said
on Friday.

That compares to the typical rate charged to factories of
1.61 rand and 1.40 rand for households, Beeld reported.

BHP was not immediately available to comment on the details
of the contract, whose details were released this week after a
court ruled in favour of a public information request by Beeld.

“What BHP Billiton pays is clearly less than the average
paid by the other big mining and industrial customers, which is
between 56-58 cents (per kWh) for this financial year,” Eskom
spokeswoman Hilary Joffe said.

She declined to confirm the specific amounts paid by BHP but
said South Africa’s energy regulator would be taking up the case
after Eskom’s failure to directly renegotiate the contracts.

The National Energy Regulator of South Africa (NERSA)
declined to comment directly on the report but said a public
hearing into the BHP contracts would be held in late April. It
would announce its intended course of action only after that.

The contracts with BHP, which consumes 9 percent of Eskom’s
power output, date from the early 1990s when there was abundant
supply in South Africa, the legacy of a government policy of
underpricing power to attract industry.

The deals contributed to a loss of 9.7 billion rand ($1.04
billion) in 2009. In subsequent years, accounting losses from
these derivative contracts, which are linked to the price of
aluminium and the rand/dollar exchange rate, have been smaller.

Eskom has secured a change of a similar deal it had with
Anglo American’s zinc Scorpion mine in Namibia.

The BHP contracts cover power to its Hillside and Bayside
aluminium smelters in South Africa and its Mozal unit in
neighbouring Mozambique. Beeld said Hillside was charged 22.65
cents per kWh and Mozal 36 cents.

Eskom has been granted annual power tariff hikes of 8
percent over the next five years, following increases of around
25 percent in recent years, to raise cash to build new power
stations.

The increases have fuelled criticism from industry and
consumers who say they should not bear the burden of fast-rising
electricity costs when BHP pays a fraction of the cost price.

South Africa is facing potential electricity shortages as
its reserve margins narrow ahead of the southern hemisphere’s
winter from June to August, when usage rises.