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By Agnieszka Flak and Marina Lopes
CAPANGA, Mozambique, March 7 (Reuters) - For Mozambican tribal queen Zoria Macajo, the thatched-hut village of Capanga, nestled in the hills above the Zambezi river, has been her family's home for generations.
For mining giant Rio Tinto it is a headache sitting on top of one of the world's largest untapped coal reserves, standing in the way of the company's expansion.
Macajo, Capango's the 59-year-old leader is refusing to leave her home until her people are paid for their land, a contentious issue for Rio which has found it difficult to get its Mozambique business running at full speed.
"Our people have rights. The company promised it would compensate us," Macajo said, sitting on a straw mat outside her house, the only concrete dwelling in the village where goats and pigs roam freely.
"The people must receive their money," she said with several of the village men nodding in agreement.
Rio said it had agreed with some families a like-for-like compensation, promising houses and land in the new Mwaladzi resettlement area, some 40 km (25 miles) away from Capanga.
The company said it has paid some families affected by its operations, including the queen, and is negotiating separate payments with a farmers' association, which it says holds formal title over some 150 ha (370 acres) of land in the area.
But Macajo said she had not received any money and the association does not represent her or others in the community.
Rio's Mozambique troubles are not unique. Mining companies frequently walk a tightrope between the demands of the stock market and those of local communities, demanding a larger share of profits from the resources they sit on.
This often comes to a head if villages and communities have to be moved to make way for mines, creating a flashpoint as locals can dispute location, housing, compensation - and few have official documents to prove their rights in the first place. Often, those being moved run small-scale mining operations and are reluctant to be evicted.
Macajo said her community was prepared to aggressively defend their village against Rio Tinto, threatening a repeat of violent protests that broke out in January last year when 700 families took to the streets over living conditions and lack of fertile farming land in a resettlement built by Brazilian miner Vale.
HIGH STAKES FOR RIO
Rio Tinto, Vale and dozens of others have flocked to the region since 2004, hoping to secure some of the 23 billion tonnes of coal estimated to lie beneath the war-scarred state, especially with supplies of quality coking coal scarce and global demand growing.
But developing mines in the former Portuguese colony has proven more difficult than initially imagined, with shoddy railways and ports, depressed coal prices and frustrated communities cooling the coal bonanza.
For Rio, the stakes are high in Mozambique, where it wrote $3 billion off the value of its coal assets earlier this year, in a hit that ultimately ousted its chief executive.
Making a success of Mozambique where his predecessors failed would be a major success for incoming boss Sam Walsh. The company has said it is reviewing its coal assets in the country but Walsh has also said the project is not currently for sale.
Rio's write down on its Mozambican assets was largely due to difficulties in getting the coal from pit to port, but the community's resistance may place further hurdles in its plan to expand its Benga mine, one of the assets the firm inherited when it bought explorer Riversdale in 2011.
RUINS NOT HOUSES
The complaints of Macajo and others echo the frustration of ordinary Mozambicans who feel the boom, rather than benefiting them, is worsening their living conditions by pushing up the prices of food, fuel and housing and threatening their land.
The families at Vale's Cateme resettlement have complained about leaks, cracks and floods in homes, which they say the firm has been unable to fix despite several attempts.
Cateme's location, some 10 km away from the main road and another 40 km from Tete, also makes it difficult for people - many reliant on jobs like brick making or selling vegetables - to get work.
Vale said it was still rehabilitating some of the houses, but residents like Domingo Foguete Domingos said they prefer to be paid instead so they can build sturdier houses elsewhere.
"These are ruins, not houses," the 46-year-old said while pointing to the cracks in the wall of his house.
Proper management of resettlements is a steep learning curve for the government, communities and civil society in Mozambique, who are often unaware what to ask for until it is too late.
"We have to teach people that this is not a favour, it is their right," said Julio Calengo, an activist with the Mozambican Human Rights League.
The government called the Vale fiasco a "learning exercise" and later passed a law promising to fine firms or even withdraw their operating licenses if they do not relocate communities in a way that protects their social and economic interests.
Companies now need to prove that their resettlement areas provide the necessary infrastructure to support sustainable economic activities such as farming and while the tighter policies were welcomed, critics wonder if the inadequately staffed government will manage to enforce the rules.
Rio Tinto said it had consulted widely with communities and the government and insists the process was transparent, but the queen said she had yet to be officially consulted even as workers began drilling holes around her land.
The company said more than 80 of Capanga households had already been moved and nearly 600 await relocation. Most of the families will be moved to the rural area at Mwaladzi, while a quarter were classified for urban resettlement.
Macajo said Mwaladzi has asphalted roads, street lights and more durable houses than those built by Vale, but the lack of fertile farming land would still make it difficult for residents, mostly subsistence farmers, to feed their families.
The community said it was hoping to use the money promised from the resettlement to buy fertile plots elsewhere, while the company said it was investigating the possibility of creating a water catchment dam in the area to help irrigate the land.
Rio Tinto plans to continue the resettlement in April, but Macajo vows no more families will budge until they are paid.
"I will not leave. They can kill me, but I will not leave this land," she said.