TFR rates threaten Matola expansion

[miningmx.com] — THE viability of Grindrod’s proposed $600m to $800m Matola Terminal expansion (TCM) to 20 million tonnes/year (Mtpa) of coal would be compromised if Transnet Freight Rail’s (TFR’s) railing costs from South Africa’s Limpopo province to Mozambique remained unchanged.

Speaking at the Coaltrans Mozambique conference, Craig Grinyer, commercial executive of Grindrod Terminals, said, however, there were talks with TFR which could see a potential public private partnership that help lower tariffs.

“It’s no secret that on a per tonne basis, the cost of railing coal from Limpopo province to TCM is expensive,’ said Grinyer. “The viability of the project would be compromised if rates stay the same.’

TFR has to finance the acquisition of some 3,500 wagons in order to match the planned expansion of TCM. A way might be found to help TFR finance this possibly in return for lower tariffs.

This is not the first time TFR has been criticised for high railage costs with John Wallington, CEO of Coal of Africa (CoAL) saying the sustainability of freighting coal to Mozambique, which runs at double the cost of railing coal to Richards Bay Coal Terminal (RBCT) would be challenged.

Speaking at CoAL’s financial results announcement in October, Wallington, said the total cost of railing to the recently expanded Matola terminal was between R250/t to R300/t (US$33/t to US$40/t), including port costs. Rail costs alone were about R174/t (US$23,2/t), he said.

Grindrod recently completed a shares for cash transaction totalling R2bn (US$238m) with Remgro which Grinyer said “wanted to participate in terminal expansion’. A bankable feasibility study would be completed in mid-2012 where a decision would also be taken as to whether to phase the project.

If TCM’s expansion was phased, it would be completed in 2018 after moving capacity from its current 6Mtpa to 10Mtpa and then to the targeted 20Mtpa. “This is an ambitious project,’ said Grinyer who also said Grindrod was on the look out for additional participants despite reports CoAL had exclusive rights to the entire planned terminal expansion. He also suggested Grindrod could possibly take coal from Botswana after the southern African country announced last week it was in a position to export coal.

Grindrod recently completed the expansion of TCM to 6Mtpa and was seeing volumes steadily rise. “In the last three months, we’ve seen a tempo of about 5.5Mt,’ said Grinyer. Assuming 50 wagon trains, this was an increase representing some 130 trains a week from current weekly trains of 35.