At the time of going to press, a memorandum of understanding between the National Ports Authority (NPA) and the Richards Bay Coal Terminal (RBCT), which allows the terminal's phase-five expansion to go ahead despite a lack of concensus on the lease agreement for the portion of NPA-owned land on which the expansion is due to take place, was imminent.
The project will expand the capacity of the terminal from 72-million tons a year to 82-million tons a year by late 2004, or early the following year.
Among the issues that have yet to be resolved before the RBCT and NPA can sign the lease agreement are black economic empowerment, minimum guaranteed throughput and fair return on investment for the NPA, outlines NPA executive manager of property Nyameka Madikizela.
However, she is confident that the pending issues can be negotiated, and that the lease will be finalised by July, when it will be submitted to the Transnet board for project approval.
Also outstanding is a decision on an environmental impact assessment (EIA) that relates to where environmental dams should be positioned. This ruling will decide the future location of two 80-million litre dams, which will contain water run-off from the terminal.
This had been highlighted as a problem in the previous EIA, which concluded that run-off water would be detrimental to the biosphere surrounding Richards Bay, in Kwazulu-Natal.
However, the current EIA avoids this by ensuring that water is contained in the dams, and only enters the sea at times of excessive rain, reports RBCT MD Nigel Stevens.
With the terminal's final go-ahead, it will follow in the footsteps of several failed attempts to introduce additional South African coal exporters to the international market through Richards Bay over 20 years.
The current phase-five expansion initiative should do just this when it allows three new exporters, as well as some small-scale miners, entry into the international coal market. Stevens reports that the core project team has gone out to tender, and that these tenders are being evaluated at present. Terminal management is undertaking all tasks that do not involve spending.
Those waiting with bated breath for project approval are CoalLink, which will increase its capacity and improve infrastructure on its Mpumalanga– Richards Bay rail line and add another rail loop closer to the terminal; NPA, which will extend the quay at an estimated cost of R320-million; and, of course, the contractors that have yet to hear whether they will be involved in the R700-million terminal expansion.
The two big-ticket items are the stacker-reclaimer and the tippler.
The tippler, used to invert rail trucks, and the stacker-reclaimer, used for placing and removing coal from a stockpile, will have similar specifications as existing 6 000-t/h-capacity equipment. Conveyors associated with this equipment, as well as a spine conveyor and a bypass conveyor, will also be required.
Tenders will be awarded within a month of the project reaching go-ahead status. The entire project is due to be completed within 30 months of being initiated, confirms Stevens.
He notes that only the quay extension is on a critical path, which means that conveyors will have to wait for 23 months until the quay extension is complete before they can be installed.
Madikizela affirms that planning for the quay extension is under way, with tenders for the quay and basin expected to be out in September.
While making good business sense, perhaps some of the participants' reticence to spend money prior to an approval that seems exceptionally likely, comes from memories of the project that has being plagued by problems since it was initiated in a different form in February 1997. At that stage, a consortium, consisting of construction firm Group 5 and coal-trader Anker, first proposed that an independent 12-million-ton-a-year coal terminal be constructed to the west of the existing RBCT.
Envisaged as a separate stand-alone terminal, it was to have its own conveyor belt to transport coal to a separate quay, as well as several of its own stacker-reclaimers, among other equipment.
However, from the beginning of the project, there was confusion as to what the long-term interest of Group 5 was in the project, affirms a source who was intimately involved with the COALlink, Spoornet and SDCT strategies and positioning at the time.
Added to this uncertainty, were the high costs of having a terminal that was not integrated into RBCT infrastructure. Trevor McGiddy, CEO of what was to become known as the SDCT, rallied to find coal exporters and the then Gold Fields Coal and Iscor Coal, as well as Tesa joined the consortium.
It was a brave step for Gold Fields Coal and Tesa to join the SDCT group, as they were already RBCT members, frustrated by the fact that the terminal had no plans to expand to match their excess coal-producing capacity. The consortium's proposed export capacity then totalled ten-million tons a year, with the remaining two-million tons a year allocated to ad hoc exporters, as part of an empowerment arrangement the then Portnet had insisted on.
With a lease agreement from Portnet, disagreements over Transnet's 80% take-or-pay funding-guarantee requirement emerged. The rail company believed that this, and its sophisticated risk-and-reward-related pricing mechanism, would allow it to guarantee the multimillion-rand capital investment that it would be making.
However, an additional significant event occurred in October of 1998 when Gold Fields Coal was bought by the then AmCoal, which indicated that it would take a 3,5-million-ton stake in the 12-million-ton-a-year venture.
However, in an upset that put a damper on the project, it later withdrew this offer as a result of billions of rands of Australian investment that gave AmCoal additional coal-exporting capacity.
With these events, as well as the drop in the coal price to $20/t, the terminal plan was revised and the capacity and costs reduced, the source reflects.
However, by January 1999, Eskom Enterprises, with its large affirmative-action component, decided to take up the shortfall in tonnage, while Transnet was considering taking up the missing two-million-ton allocation that would have been allotted to ad hoc suppliers.
Then, in March of that year, discussions began between the SDCT consortium and RBCT members as a result of the two groups having been brought closer through the SDCT's association with AmCoal when it was considering taking advantage of the proposed terminal's excess capacity.
Cynics speculate that, at this stage, Anglo and Billiton were also motivated by a desire not to be the agencies responsible for the killing of the project, or the organisations responsible for black economic empowerment not being fostered in the coal industry.
Hence, in early 2000, it was decided to integrate the SDCT into the existing RBCT site, where SDCT members would be able to share rail and port infrastructure with established tenants.
However, before the plan could be put in place, existing tenants insisted on being allowed a share of the capacity expansion. To this end, the smaller RBCT members that were not part of the SDCT consortium – namely Duiker, Kangra, Total, Sasol and Eyesizwe – were accommodated by being allowed a 3,5-million-ton allocation of what had been reduced to become a ten-million-ton expansion.
Meanwhile, Ingwe and Anglo Coal decided to forego their 65% entitlement of any RBCT expansions so that this 6,5-million-ton-a-year portion would be reserved for the coal-export initiative's members.
While mining companies congratulated themselves at finally being able to structure a fair coal-tonnage distribution plan, additional difficulties were to present themselves, recalls a source.
Among the problems that threatened to prevent the plan going ahead was COALlink's desire to increase coal-transporting rates that it had believed were set too low.
It subsequently proposed to charge higher tariffs to SDCT members than RBCT members, which would have their tariffs renegotiated in 2003. It reasoned that, since it would have to invest considerable sums to upgrade its infrastructure, it should be reimbursed.
However, SDCT members were resistant to this proposal, insisting that the RBCT consortium be charged similar rates, or that there be an understanding that the tariffs charged to the two groups would converge later.
Earlier this year, SDCT members finally agreed to accept considerably higher rail tariffs and, while no promise to converge the rates of the two groups has been made, there is an understanding that there is no reason why this should not happen, the source states.
With this explosive issue solved, signature of the memorandum of understanding will allow the terminal expansion to proceed.
Interestingly, some suggest that the phase-five expansion is not as vital for the coal industry as expected, since it will not be of great benefit to black economic empowerment firms.
SDCT chairperson Solly Moloko disputes this, saying that the firms that will gain access to the export market through the port of Richards Bay are linked strongly with black-empowerment ideals.
Kumba – which will receive a two-million-ton-a-year stake in the expansion – is intent on bringing in black- empowerment initiatives, while Golang – which will receive a 3,5-million-ton-a-year share – already comprises empowerment firm Sebenza, along with empowerment-orientated Eskom Enterprises and Dutch firm Anker.
In addition, Eskom Enterprises' million-ton-a-year stake in the terminal allows for a 16,7% share to be made available to empowerment firms.
However, it is the 500 000 t/y allocation to small-scale miners that many do not believe is sufficient to transform the coal industry into one that includes all sectors of society. To this, Moloko replies that more could be negotiated with existing RBCT members, which have a 72-million-ton-a-year allocation compared to the SDCT's 6,5-million-ton-a-year entitlement.
Others suggest that the allocations at RBCT will change to increasingly meet the needs of empowerment and small miners as the industry sells unused coal assets over the coming years.
One advocate of the sale of unused coal assets is Minerals Bureau coal and hydrocarbons chief mineral economist Xavier Prevost.
He says that, in a subsequent expansion to phase five, economic empowerment companies could play a bigger role in South African industry, provided that unused coal reserves, in the hands of the large coal producers, were released to new entrants to the industry.
However, at present, the expansion will benefit small producers only marginally, through their access to a 500 000 t/y allocation, he states.
"The real issue that will affect the South African coal industry in future is access to readily available and reliable information about the remaining reserves for the new coal entrepreneurs," Prevost says.
The platform for such information could be the inventory of coal resources and reserves that is being carried out by the Department of Minerals and Energy at present, he argues.
Still, it is questionable whether Richards Bay's terminal is the ideal location for initiatives intended to benefit small-scale miners.
This is due to the dedicated terminal being well-suited to high volume and high throughput rather than the smaller parcels of coal that Maputo and Durban ports easily cater for, notes Stevens.
He indicates that ad hoc users will have to be made aware of the logistics involved in exporting from the terminal, at which the smallest 25 000 t parcel of coal is loaded within four hours.
Similarly, Moloko stresses the importance of ensuring that small-scale miners are aware of the long lead times that may be associated with exporting from the terminal.
He notes that it will take junior miners a considerable time to fill an 8 000-t train even before the lengthy process of transporting coal, offloading it on to a stockpile and then loading it on to a ship for transportation elsewhere.
It is RBCT's intention to 'put to bed the operation' and then ensure that junior miners are accommodated without operations being hampered.
Moloko notes that small-scale miners that meet the criteria for exporting from the terminal have not been identified to date. However, as soon as the allocation is available, it will be made known publicly, he states.
In the meantime, there has been some speculation about a phase-six expansion to RBCT.
Here the vote seems to be divided, with Stevens, Moloko and others insisting that there is insufficient demand for another terminal expansion.
Meanwhile, Prevost notes that there are plans to use an existing area of the port and increase capacity by another four-million tons a year to six-million tons a year.
If this expansion takes place, it will provide real capacity to economic empowerment companies' partners and independent producers, he says.
Madikizela elaborates on this theme, stating that, while expansion beyond phase five is not under discussion at present, the NPA is interested in determining whether it can accommodate the needs of the smaller mines which do not have export opportunities through RBCT.
While this debate continues, the capital-intensive expansion is likely to affect the Richards Bay community positively by creating between 800 and 1 000 jobs in the area during peak construction time, informs Stevens.
Moreover, the community will benefit from outsourcing opportunities at the terminal, he says.
Other benefits will include those that will be felt by the individual companies that will increase their export tonnages.
For instance, Eskom Enterprises will be able to create empowerment ventures, exploit the resources available to it and become a global player, in accordance with its aim to have 50% of its revenue come from activities other than its existing power-generation, transmission and distribution tasks, informs Moloko, who is also the executive director of information technology and primary energy at Eskom Enterprises.
Another party that will benefit is Kumba, which had never previously been able to export from the terminal.
In addition to these benefits, the expansion at the world's largest coal-exporting facility, RBCT, may influence South Africa's ranking as the third-largest exporter of coal in the world. With these benefits in sight, it is hoped that the terminal expansion will be able to overcome the last of the hurdles to its becoming a feasible exporter of coal in 2004.