R10.4bn Transnet-South32 deal
TRANSNET yesterday signed a R10.4 billion contract with resources group South32 that will see the state-owned freight rail and logistics company transport 2.6 million tons of export manganese per annum over seven-and a-half years.
Transnet said it planned to seal a number of similar contracts with other manganese producers to have 12.5 million tons of manganese ultimately transported mainly from the Hotazel area in the Northern Cape through the Saldanha and Port Elizabeth ore railway lines each year.
Transnet chief new business development officer Gert de Beer said: “This contract will be followed by other important players in the manganese sector and will result in a secure and robust manganese export volumes for our European and Chinese markets.”
De Beer said the contract was in line with Transnet’s plans to create capacity ahead of demand in freight, ports, terminals and rail systems in South Africa.
“It is a careful balance of validated (demand) and timing of completion of your infrastructure projects,” he said. “As we see how the mines get closer to production, we make sure that there is no timing gap between them being (ready) and us being ready, otherwise you sit with idle infrastructure.”
De Beer said the contract with South32 detailed the volumes to be moved as well as available capacity.
This, he said, created predictability and an appropriate approach to mitigate the risk of investment in infrastructure. He said Transnet planned to accelerate its investment on iron ore, coal or manganese if the demand increased.
Demand “If it is validated and committed demand, we can accelerate some of our projects,” he said. “Because we have something to borrow against.
“As a state-owned enterprise that must borrow against its balance sheet, we do not have the luxury of borrowing with hope.”
De Beer said Transnet had grown the volumes of manganese exports in the past five years from 5 million tons to 13.2 million tons. “The South African manganese industry has weathered the storm, despite the fluctuations in commodity prices.”
De Beer said 15 percent of Transnet’s capacity would be allocated to new entrants in the manganese export market. “The 15 percent capacity allocation was made available to encourage new and emerging entrants to take part in mining activities in the country.”Transnet executive manager: business development for iron ore and manganese, Bonginkosi Mabaso, said existing manganese players were currently using the 15 percent, “but we have an arrangement that, should there be a new entrant, we are able to tap into the allocation up to the limit of 15 percent.
“We have an arrangement in terms of the notice period (to make the allocation available).”
Lucas Msimanga, vice-president for South32 manganese South Africa operations, said: “This contract provides a stable base for the execution of export sales, with no significant exposure to the business during market down cycle.
“Furthermore, it demonstrates the strength of the relationship between South32 and Transnet.”