Exxaro faces coal export knock

Brendan Ryan | Thu, 02 Jul 2009 14:25
[miningmx.com] -- THE Richards Bay Coal Terminal (RBCT) looks set to restrict access by the Phase Five exporters, and the company which could be penalised the most is Exxaro Resources.

This is because Exxaro has invested at least R160m for its share of the capital cost of the expansion of the terminal. It has also ploughed more than R1bn into developing new mines to produce the coal which it will not be able to export as originally planned.

Exxaro holds Phase Five entitlements totalling 4.5 million tonnes (mt) per year which consist of 2mt/year through its membership of the South Dunes Coal Terminal (SDCT) and 2.5mt awarded to it directly.

Over the past 18 months Exxaro has invested R950m as its 50% share of the total R1.9bn cost of expanding the Mafube Colliery, in which its 50% partner is Anglo American.

Exxaro has also spent R269m on developing the Inyanda colliery which was commissioned in September 2008 and is ramping up to full output of 1.5mt/year.

In September, Exxaro said it planned to export 4mt/year through RBCT by end-2008 and would increase this to 6.3mt/year once the RBCT Phase Five expansion had been completed.

The Phase Five expansion will take the capacity of the RBCT to 91mt/year from the current 76mt/year. It is now due to be commissioned at the beginning of October instead of the previous target of the beginning of July.

That’s the result of delays in commissioning the new stacker/reclaimer, which in turn have affected the installation of the computer-controlled loading system.

The problem is that Transnet Freight Rail (TFR) only has the capacity on the line to rail 70mt/year at present; Transnet’s current five-year R80bn capital expansion programme only budgets to increase that to 75mt/year by 2013.

The result has been a dispute since January between the current RBCT members and the Phase Five newcomers over how the available coal should be allocated between them.

Coal industry sources tell Miningmx that the RBCT has sent a proposal to the Phase Five exporters which states that, at a total throughput of 72mt/year, the amount allocated to the Phase Five exporters would be about 3.6mt/year.

The Phase Five exporters believe they should get 11.9mt/year at a throughput level of 72mt/year, based on a calculation of their equity stake in the RBCT at its new nominal capacity of 91mt/year.

The current RBCT members reject this because calculating quotas that way would mean they have to take severe cuts in their present export volumes.

A coal industry source said: “They are calling it a proposal but it’s really a ‘diktat’ that that is going to be enforced, whether we like it or not.”

An RBCT spokesperson said: “We are going through a process which will allow the Phase Five exporters to export coal while TFR is ramping up capacity. I cannot provide any further details at this stage.”

Exxaro CEO Sipho Nkosi could not be reached and an Exxaro spokesperson declined to comment.

Other companies affected by the dispute include Eskom Enterprises which has a 3mt/year entitlement through the SDCT and has also paid its share of the capital expenditure as well as ARMCoal, which has a direct 3.2mt/year allocation.

ARMCoal is Xstrata Coal’s empowerment partner and the two have expanded the Goedgevonden mine to meet their expected higher export volumes.

The coal exporters have been arguing with TFR over a new rail tariff scheme for nearly five years.

The issue is that TFR insists on a take or pay system through which the exporters guarantee to rail specific volumes of coal and will have to pay for those even if they fall short on production.

Without such guarantees, TFR is not prepared to take the commercial risk involved in investing the billions of rands required on infrastructure and rolling stock to increase the capacity on the line to 91mt/year.