Extended rail expansion negotiations between Kumba Iron Ore (KIO), Africa’s biggest iron-ore miner, and State-owned Transnet have pushed production at its nine-million ton a year Sishen South project back by a year, to 2012, the Anglo American subsidiary said on Thursday.

The project would now only begin production in 2012, while a rail deal was “imminent”, new CEO Chris Griffith said.

Sishen South, located 80 km south of its Northern Cape Sishen operation, had, meanwhile, “moved to the final stages of approval”, after having won its mining rights and a water licence for the project.

Griffith’s predecessor Ras Myburgh, who left KIO for a secondment at power parastatal Eskom on July 1, had earlier this year stressed the importance of a speedy conclusion to the talks between iron-ore producers and Transnet, or the project might be delayed by as much as a year.

Myburgh had in May anticipated that the commercial talks would be concluded in “the early part of this year”, adding that KIO was “ready to push the button”. At the time, KIO was planning on commissioning the project in 2011. The project would now start producing in 2012, with production ramping up in 2013.

But Griffith played down the delay.

“We really have progressed our discussions with Transnet sufficiently well enough to comment that it is now imminent,” asserted Griffith. “That process has progressed really well.”

He added that KIO had a good relationship with Transnet, and that it was improving.

In the meantime, the capital costs of Sishen South had been heading northwards.

Griffith said that the real cost of the greenfields project stood at R5,9-billion in January – already higher than earlier estimates of R5,4-billion – but that in nominal terms, the cost would be some R8,5-billion.

KIO had been working to mitigate this by ordering long-lead items, such as crushers.

Sishen South’s product would be similar to that of the expanded part of the company’s flagship Sishen mine, or the Sishen Expansion project, which would be producing at an annualised rate of 13-million tons a year in the second-half of 2009, stated Griffith.

Griffith previously served leading global platinum producer Anglo Platinum as operating joint ventures head.

Anglo American owns 64,1% of KIO, with Sate-owned Industrial Development Corporation holding 13,2% of the iron-ore producer.

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