Empowered companies in pole position to win allocations at expanding terminal

24th March 2006 By: Ollie Madlala

The Richards Bay Coal Terminal (RBCT) expansion and the number of coal projects that will go ahead, as a result of the expansion, look to provide the South African coal exporters in general, and black economic-empowerment (BEE) companies, in particular, with an optimistic future. The project, expected to increase coal exports by 28%, puts strong emphasis on giving BEE companies access to the export market. As a result, four-million tons have been reserved for emerging BEE exporters with modest export volumes. Exporters must be 100% BEE to qualify for part of the four-million tons.

In addition, there are six-million tons that will go to the old South Dunes Coal Terminal participants, 66% of which must be BEE, with Kumba Resources (two-million tons), Eskom Enter-prises (one-million tons) and Golang Coal (three-million tons) big in that. There is also a new approach dubbed a ‘subscription tonnage’, and all participants (BEE or non-BEE) can apply for tonnage, but, again, preference will be given to BEE companies in the extra ten-million tons. Are there enough BEE companies in the coal industry to take advantage of the opportunities presented by the expansion project? RBCT executive chairperson Kuseni Dlamini tells Mining Weekly in an exclusive interview that, “whether or not there would be enough BEE participants to take up the offer still remains to be seen, but one has to remain optimistic that there would be enough BEE participants with the coal to export”.

He adds that the submission process is still to take place. “We can only know that once we’ve received the applications,” says Dlamini, who adds that the company formulated an objective process with which companies wishing to take part in the project would have to comply. “The companies will have to satisfy a number of criteria, including proven mining capacity, demonstrated Spoornet capacity support and an unconditional offer to acquire the tons applied for,” says Dlamini.

He states that the company’s underlying objective in under- taking the expansion is to satisfy the aspirations of all economically- sustainable export-coal producers, thus positioning the coal industry in the forefront of transformation.

“But, should the BEE exporters not take up the tons reserved for them, the bigger companies are likely to absorb any spillover,” says Dlamini. In his view, the R1,1-billion project does not only provide opportunities for coal exporters, but is also responding to what is currently happening in the country’s economy, in general, and to the global coal market, in particular. “The project is expected to improve South Africa’s share of the global export-coal market.” Dlamini highlights that the coal industry remains the second- biggest contributor to South Africa’s foreign-exchange earnings. Further, the expansion project responds to the social needs of the Kwazulu-Natal community, providing employment opportunities. Dlamini is of the view that the expansion project, which, he says, is proceeding well, reflects the spirit of transformation in South Africa. “The additional tonnage allocated to BEE coal-mining companies opens up opportunities for BEE companies which have not previously been able to export coal.” The annual capacity of the terminal is being expanded from the present 72-million tons to 92-million tons. Dlamini explains that, should the 92-million tons prove not to be enough to satisfy the demand for export allocations, RBCT would be prepared to consider further expansion based on a proven business case.

“If there is coal that needs to be exported, RBCT would be prepared to consider an additional increase in capacity: our business is the export of coal – the more there is to export in response to market demand, the better,” says Dlamini. He says that it would help if there was complete information available determining the amount of coal that the country actually possesses because that would enable RBCT to plan additional future expansion. As an executive chairperson, Dlamini is responsible for providing strategic direction to RBCT, and is involved in the day-to-day running of the operation. Dlamini’s vision is to ensure that the RBCT does not only remain the biggest terminal but also to ensure that it is the terminal of choice, providing a world-class service to its customers and shareholders, while also benefiting its diverse stakeholders. To ensure that it remains the best, the RBCT management team has come up with a strategy to benchmark the company against international terminals in order to remain a world-class facility providing a reliable cost-effective service to customers. The company intends to remain South Africa’s flagship in the global coal market. Department of Minerals and Energy chief mineral economist Xavier Prevost is of the view that the RBCT capacity expansion should have taken place earlier.

He says that, as a result of the delay, the impending transform-ation of the South African coal industry has been very slow. “I hope it is not too late for the industry to recover the place it had among the main coal exporters in the world,” he says. Because the additional RBCT export capacity of 20-million tons a year will only be available from 2008, Prevost foresees the additional time giving more small-scale mines time to gain feasible access to the export market. Since the establishment of the first coal BEEs in 1997, both the number of coal BEEs and their production volumes have increased. As a result of the Mineral and Petroleum Resources Develop-ment Act, companies with large coal reserves have agreed to make their noncore reserves available to BEE coal entrepreneurs. Prevost says that coal BEEs now control 16% of the country’s coal production, a percentage that is poised to increase to 24%. Most of the mines were made possible by the small incremental annual coal-export allocation (from one-million tons to four-million tons) given by the RBCT in 2003. During the last year, 16 mines shared the allocation and, for the 2006/7 allocation, the number has increased to 19. While the tonnage demanded is some nine-million, only four-million tons are available. In many instances, the ability to have mines producing both export-quality coal and products for the local market is what makes small operations feasible. Prevost’s contention is that, if the RBCT expansion beyond the 72-million tons had taken place when it was first planned nine years ago, South Africa would have double the 16 coal-exporting BEEs. RBCT is a private terminal owned by BHP Billiton Coal, Anglo Coal, Xstrata Coal, Total, Sasol, Kangra and Eyesizwe companies that have now waived their entitlement rights in the new expansion and opened the way for BEE participants, which, in Prevost’s view, is a magnanimous example of the fair-mindedness of South African business. As far as the progress on the project is concerned, Dlamini says that “we are working towards fulfilling all the conditions precedent and we are confident that, through the cooperation of the relevant bodies, we would be ready to start with the project soon”. He adds that since the announce- ment of the expansion late last year, RBCT has done the environmental-impact assessment and submitted the required information to the Department of Agriculture and Environmental Affairs in Kwazulu-Natal. “Good progress has also been made in securing funding for the project, which is underwritten by the current shareholders”.

RBCT is pleased with Spoornet’s announcement of the R3,5-billion spend on new locomotives for the coal line and it is currently having talks with the National Ports Authority, aimed at concluding a new lease.

RBCT will be able to announce the start date once its board is satisfied that all the conditions precedent have been met.

Situated in the deepwater port of Richards Bay, RBCT is the largest export-coal terminal in the world. Established in 1976 with an original capacity of 12-million tons a year, it has grown into an advanced 24-hour oper-ation exporting more than 68-million tons of coal a year to buyers worldwide. The terminal’s shareholders control 49 coal mines in Kwazulu-Natal and Mpuma-langa. RBCT shares a strong cooperative relationship with Spoornet, which laid the 560-km railway line linking the coal mines to the port, and with the National Ports Authority, which coordinates the arrival and departure of more than 700 ships a year. Laboratories at RBCT are independently managed by the South African Bureau of Standards and certificates of analysis are issued for each coal shipment. The 260-ha site boasts a quay 1,6 km long with five berths and four shiploaders, the two largest of which load at 10 000 t/h and 11 000 t/h. The terminal can store up to 6,7-million tons of coal and is serviced by six stacker reclaimers, two stackers and a reclaimer. The Phase Five expansion, which began last year, will take 27 months to complete. Included in this expansion is a fifth tandem tippler for offloading, increased stockyard capacity, a stacker reclaimer, supporting infrastructure and an extension of the dedicated quay to six berths measuring 1,9 km. Two water recycling dams will also form part of the project. RBCT employs more than 500 people. The phase five expansion, which is due to begin soon after the fulfilment of the conditions precedent, will take 27 months to complete.