Coal rail constraints forced Exxaro Resources to call off sale of Leeuwpan mine

THE logistical constraints at Transnet Freight Rail (TFR) forced Exxaro Resources to halt its planned sale of its Leeuwpan mine in Mpumalanga, the company said on Thursday in an operational update.

“We made good progress on the disposal, but then the issues around TFR arose and it became more problematic to get the transaction to move ahead. The process was stopped,” said Sakkie Swanepoel, group manager of marketing & logistics for Exxaro.

Exxaro announced in 2020 that it planned to sell its coal interests at Leeuwpan following a review of its portfolio. At the time the sale was supposed to be a single transaction. “Whoever is buying the asset must be able to evacuate the coal and therefore it’s important – whoever the owner is – that they must be able to secure Transnet rail with the asset,” he said.

Adding to the problem was that TFR was unwilling to transport so-called “small sidings” – where trains are loaded with only 6,000 tons and not 8,300 tons.

Exxaro said it would make an announcement on the Leeuwpan matter in June next year.

Trucking economy enabled

Although Exxaro did not want to elaborate on the detail of costs of its operations during the operational update, the company said the logistical crisis at TFR brought about sharp increases in transport and handling costs.

The company had to resort to road transport due to capacity constraints at Transnet, which was made worse by a paralysing strike in October this year and a derailment in November of a coal train on Transnet’s North Corridor. The derailment took place against a backdrop of threats and disruptions by “disgruntled groupings seeking business opportunities”, according to Transnet.

Swanepoel expressed concern about the TFR’s continued capacity constraints, saying there’s a real chance that it “enables a trucking economy” where companies with vested interests are coming to the fore.

“If transport by trucks were to be removed and the businesses taken away as rail transport improves … it might not be such a smooth process.”

Sinister motives

According to Swanepoel, there’s a clear indication that some of the cable theft and vandalism that is happening on Transnet’s coal line might be driven by ulterior motives and not solely copper theft.

“You must ask yourself: do people do it for the copper? Why don’t they go the branch lines where there are less surveillance and where it’s much quieter?

“Is it really about the copper, or about making sure the coal line doesn’t operate as we wish it would It’s a concern from a strategic point of view.”