The mining lease was granted on August 19.

The Mbalawala project, which is Tanzania's first privately funded coal mine, has an initial production target of 10,000 tonnes of coal per month which will be used for the domestic market.

Stage 2 will increase supply to 3 million tonnes per year, with plans to export 1.5Mtpa of thermal coal to potential markets in Kenya and India by stage three.

IEC executive chairman Graeme Robertson reportedly told Reuters the company planned to invest $236 million in the coal mine, on top of $120 million for a coal-fired plant.

“This investment will increase by some $93 million to increase the mining to a rate of up to 5 million tonnes per year,” Robertson was reported as saying.

“We have identified several possible sites for power stations near Mbalawala for 120 megawatts.

“We are trying to fast-track this station with two 60 megawatt units to be installed by end 2013.

Robertson told Reuters coal mining would begin in August after land compensation had been completed.

Mbalawala is operated by Tancoal Energy, a joint venture between IEC and the Tanzanian government.

IEC has a 70% stake in Tancoal Energy and the Tanzanian government has the remaining share in Tancoal via the state-run National Development Corporation.

A bankable feasibility study on the project showed Mbalawala had a resource of 251Mt with a mineable reserve of 40Mt of coal.

The coal mine will be an important development for the country as it battles electricity supply shortages.

According to Reuters, Tanzania plans to spend $742 million by the end of next year on power projects to help diminish the severe energy shortage.