In what has to be one of the worst acquisitions in living memory in the mining sector, Rio Tinto (RIO) has finally sold its Mozambique coal projects for $50 million. That's a mere fraction of the $4.1 billion it paid to acquire the assets three years ago under the takeover of Australian group Riversdale. Rio's shares fall 0.9% to £34.44 on the news.

The FTSE 100 miner had already written down the value of the assets by $3 billion in January 2013, ultimately costing chief executive officer Tom Albanese his job. Last week, rumours surfaced that Rio had found a buyer in International Coal Ventures and would sell the coal projects for $108 million. That proved wrong with the Indian group paying less than half that amount.

Mozambique was seen to be one of the last major undeveloped coal regions in the world. The resources were clearly there; the problem lay in the ability to transport the coal for export. That's been Rio's sticking point as it had planned to barge coal 400 kilometres down the Zambezi River to a new port that would be built on the coast. That failed because of government opposition.

It then discovered the quality and quality of the coal wasn't as good as first thought. Miners entering Mozambique had pinned their hopes on producing coking coal which is used in the steel industry and sells for a premium to thermal coal destined for power stations.

Rio wasn't alone in encountering problems in the region. Several junior miners snapped up land in the hope of finding either an extension to the mineralisation found in the Riversdale projects or exploit other parts of ground in the Tete province which fast became a mining hub for coal.

Ncondezi Energy (NCCL:AIM) had stacks of thermal coal (of which there's plenty of supplies in the world) but hoped to find the prized coking coal. It failed and was forced to rethink its strategy, switching to becoming an energy company where it would be an integrated miner and power plant operator.

Beacon Hill Resources (BHR:AIM) did strike it lucky with coking coal on its licence area but the small cap has steadily lost the market's interest after long delays in sorting out its rail to transport the coal to a port for export, as well as constant fundraisings.

Issue Date: 30 Jul 2014