South Africa risking losses through logistical ineptitude – Patrice Motsepe

31st August 2009 By: Martin Creamer - Creamer Media Editor

JOHANNESBURG (miningweekly.com) – South Africa was running the risk of losing business to rival countries because of logistical ineptitude, African Rainbow Minerals (Arm) executive chairperson Patrice Motsepe said on Monday.

"The whole Transnet issue is a very, very important one," Motsepe told the Arm annual results presentation, during question time.

Responding to Mining Weekly Online's question of Arm's response to a request that a new lower-cost, higher-capacity transport route be found for the export of manganese from South Africa's rich Kalahari manganese field, Motsepe said:

"This is not just an industry-specific issue, but it's about the country as a whole, our global competitiveness.

"The problem is that, if there is a growth in demand globally for any of the metals that we produce and that other South African companies produce, if we don't supply that market quickly enough, Australia, Brazil and various other countries competing with us, move very fast, and those opportunities, primarily because of logistical ineptitude on our side, are lost to us.

"They sometimes don't want me to participate in these discussions because you sometimes get very impatient and very irritable when you see how extremely competitive partnerships in other countries are, between business and government, to create those opportunities, and you realise that there is so much that we can do, and that we are not doing as well as we can and as well as we should," Motsepe said in response to Mining Weekly Online.

Arm Ferrous executive director Jan Steenkamp said further that, in the last couple of years, there had been a general concern in South Africa around the logistics for the long-term export of manganese ore, given that South Africa had a top-quality resource in the Kalahari.

He said that Arm, with its partner Assmang, and rival diversified miner BHP Billiton, had engaged in sponsoring a feasibility study to look at all the manganese export alternatives on the eastern corridor and the western corridors.

On the eastern corridor were Port Elizabeth, Coega and Durban, and on the western corridor was the Saldanha Bay port.

"The feasibility work is near completion. We have established that, in the longer term, there are different alternatives.

"Transnet is currently working with the producers to look at long-term export capacity," Steenkamp said.

The current export capacity of 4,4-million tons a year through Port Elizabeth was in the process of being expanded to 5,5-million tons a year, and the question was what to do beyond that.

An alternative larger-capacity route was being discussed, as Arm-Assmang alone expected to be capable of exporting more than four-million tons of manganese ore in 2011.

Steenkamp said that State-owned logistics company Transnet had a programme to accommodate expected exports of manganese to 2013.

Parallel to that was a comparison of the capacity possibilities on the eastern and western corridors in the medium-to-long term.

"The view is that solutions need to be found beyond 2013 and that's what we are currently working on," Steenkamp added.

Most of South Africa's manganese exports are currently railed to Port Elizabeth on the general freight line, but South Africa needs to find another export route, with more capacity and less cost, BHP Billiton CEO Marius Kloppers said last week.

"What we do know, is that there are very significant manganese resources in the Kalahari, and we basically have a logistical constraint, which prevents South Africa from taking market share from other producers," Kloppers said.

The current port of Port Elizabeth export channel includes a rail service from Hotazel station, the most northerly point of most of the manganese mines in the Northern Cape, to the manganese bulk-ore terminal in Port Elizabeth, South Africa's primary harbour for the export of manganese from South Africa, with Transnet acknowledging that there is currently more demand than supply.

Arm reports that the long-term manganese-ore allocation process would be completed during 2010.

Arm-Assmang also has a contractual agreement with Transnet to increase its iron-ore export to 14-million tons a year through the port of Saldanha Bay and the company is investigating the possible expansion of the Sishen/Saldanha iron-ore corridor to 60-million tons a year.

Mining Weekly Online understands that South African manganese-ore exporters are keen also to make use of the basic Sishen/Saldanha line, the capacity of which they believe can be augmented by adding more rail loops to the existing network and creating more stockpile capacity at Saldanha Bay.

Record iron-ore sales boosted Arm's results in the 12 months to June 30 with a 13% increase in sales to 7,4-million tons.

There was a 42% decreased in manganese-ore sales, however, to 2,15-million tons. Headline earnings decreased 42% from R4-billion to R2,3-billion, impacted on by the global economic recession, and profit from operations before exceptional items decreased 44% from R 6,7-billion to R 3,7-billion.