JOHANNESBURG (miningweekly.com) – JSE-listed Exxaro said it was optimistic about the “action on the ground” at State-owned Transnet Freight Rail (TFR) as it progressed plans to expand capacity on the existing rail network out of the Waterberg coal region.

The Waterberg region had one of South Africa’s largest remaining coal deposits and inadequate infrastructure was said to be holding back coal-mine developments in the area.

Exxaro, which was developing the Thabametsi mine, in the Waterberg, and the nearby Grootegeluk operations, in Limpopo, said that TFR would, by year-end, add 2.4-million tons a year of coal export rail capacity to the total current Waterberg capacity of between four-million and five-million tons.

By June next year, another 6.2-million tons a year would be added to the link, Exxaro executive head for coal Mxolisi Mgojo said on Thursday.

Speaking to the media after the group’s results presentation in Sandton, Mgojo said that, following about two years of seeking ways of “opening up the Waterberg”, the last few months had culminated in more “refined plans” for Exxaro and other potential coal producers in the region.

However, until new coal players, in addition to Exxaro’s Thabametsi mine, came on line during 2016/17, Exxaro would have full access to the rail link. The company said it had the capability to extract the required amount of coal, but doing so would depend on its supply contracts.

From 2016/17, the first phase of Thabametsi was expected to deliver 3.8-million tons a year to an on-site independent power producer.

The period of the coal supply agreement would be determined by the duration of the power purchase agreement signed with Eskom, which was estimated to extend up to 25 years.

The prefeasibility study for the Thabametsi mine was expected to be completed by the end of 2013, with the bankable feasibility study kicking off at the start of 2014.

Based on Eskom’s request for tonnages to Mpumalanga-based power stations, Exxaro previously committed to supply between 20-million tons and 30-million tons a year from the second phase of Thabametsi, but this would be rail dependent and could be realised by 2018.

The company’s adjacent R10.2-billion Grootegeluk Mine Expansion project, which would supply Eskom’s delayed Medupi power station with 14.6-million tons of coal a year, was progressing on time and within budget, and was 96% complete.

The major construction contracts were expected to be completed during the second half of 2013, with production ramp-up occurring in 2014.

Meanwhile, Exxaro FD Wim de Klerk noted that Eskom and Exxaro’s shortfall agreement saw the power utility pay out R644-million during the half-year to June, up R377-million from the second half of last year.

Exxaro had only delivered 3 000 t of coal during the interim period and expected to deliver similar volumes in the next six months.

This trend was likely to continue into the second half of the year, with Eskom paying in excess of R1.3-billion in shortfall payments for the full financial year, as deliveries were deferred to the first quarter of 2014 after construction delays resulted in unit six only being able to supply electricity to the grid in the second half of 2014.

“The parties have reached an amicable agreement to deal with this delay,” the company noted, with coal deliveries set to be despatched over a two-year period to December 2016.

The parties continued discussions surrounding the arrangement.

Meanwhile, Mgojo said that part or all of its New Clydesdale colliery (NNC), near eMalahleni, in Mpumalanga, was still up for sale, after posting a R262-million property, plant and equipment impairment during the first half of the year.

Exxaro reaffirmed that it was considering the cessation of production at NCC on the back of lower export sales prices, lower train availability and operational challenges leading to reduced profitability.

Exxaro executive GM for new business Ernst Venter said that following requests for expressions of interest earlier this year, the company received 64 proposals for its potential acquisition.

However, Exxaro halted the sale in an effort to update potential buyers on the status of the loss-making mine.

Exxaro was able to absorb most of the mines' 300 employees at other operations.