According to the Economic Times, Coal India acquired the A1 and A2 blocks in the nation’s Tete province on the basis that 20% of their deposits were deemed suitable for steelmaking while the rest could be marketed as thermal coal.

"The reserves in the two blocks do contain carbon, but it is not good enough to be called coal,” a spokesman told the newspaper.

“This reserve cannot sustain a 12% rate of return on investment in the medium to long run. Simply put, it is not coal.”

Coal India had previously targeted production from one of the blocks by 2014 but the sample coal sent to India so far was deemed unfit for Indian power plants “which can use the lowest variety of coal”

The state-owned coal producer has other assets in the nation courtesy of the Coal India-inclusive International Coal Ventures consortium’s acquisition of the Benga coking coal mine and other assets in Mozambique from Rio Tinto in July last year.

The $US50 million ($64 million) sale of Rio Tinto Coal Mozambique to ICV, which included a 65% stake of Benga and 100% stakes of the Zambeze and Tete East coal projects, came after Rio bought them as part of a $A4 billion acquisition of Riversdale Mining in the coal boom of 2011.