Logistics

Black companies allocated Richards Bay expansion

The Richards Bay Coal Terminal in South Africa is already the biggest coal terminal in the world but as a result of increased demand for capacity at the port, it will be expanded even further – greatly boosting South Africa’s coal exports. Neil Ford reports.

After years of debate, work has finally begun on expanding Richards Bay Coal Terminal (RBCT) on the coast of KwaZulu-Natal in South Africa. The additional port handling capacity has been allocated to black empowerment enterprises and other firms in the phase five development, which should enable South Africa to greatly increase its coal exports. Yet RBCT has surprised many by announcing that now talks on the further expansion of what is already the world’s biggest single coal terminal have begun. Unlike most of South Africa’s other port facilities, RBCT is owned by the companies that dominate the country’s mining sector and which are the port’s main customers. These firms have a share of terminal handling capacity in direct relation to their shareholding in RBCT: Ingwe Collieries (26.96m tonnes a year [mt/y]), Anglo Operations (19.78 mt/y), Xstrata South Africa (15.05 mt/y), Total Coal South Africa (4.09 mt/y), Sasol Mining (3.60 mt/y), Kangra Coal (1.65 mt/y) and Eyesizwe Coal (0.87 mt/y).

Table 1: rBCT phase five allocation

Mode of Access

shareholder

Applicant Name

ARM Coal (Pty) Ltd

Exxaro Coal (Pty) Ltd

Umcebo Mining (Pty) Ltd

Tumelo Coal Mines (Pty) Ltd 0.60

Yomhlaba Resources Ltd

Mmakau Mining (Pty) Ltd

long term commercial user Mbokodo Mining (Pty) Ltd

Worldwide Coal Carolina (Pty) Ltd 0.35

Allocation (million tons a year)

3.20

2.50

1.00

0.50

0.35

0.50

The shareholders had sought to increase capacity for several years but the South African government insisted that black empowerment mining companies be given a capacity allocation as part of the expansion programme. It was eventually decided to increase SDCT is to be set up as an independent company, with equity held by the companies that take a share of handling capacity. Bateman Africa has been awarded the main construction contract on the project, which will be financed through the commercial rates charged to non-shareholding users and through the purchase of equity by the new shareholders. RBCT predicts that 3,500 jobs will be created during construction. A tender was held for 9 mt/y of capacity,

The executive chairman of RBCT, Kuseni Dlamini says the process will enable as many BEE players as possible to have access to the global coal market.

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African Business | January 2008
with priority given to empowerment companies. Alexander Forbes Risk Management Services, which was awarded the task of acting as the independent adjudicator, received capacity applications from 26 mining companies and the offer was oversubscribed by more than 9 mt/y. A total of 18 bids met all of the offer criteria: as Table 1 highlights, six companies were finally awarded equity shares and a further two secured access to RBCT as long term commercial users. Each successful bidder will pay between R89 and R100 per ton of handling capacity for their shareholding. The 6 mt/y at SDCT has been given to Golang (3 mt/y), Kumba Resources (2 mt/y) and power company Eskom Enterprises (1 mt/y). Golang, which is a joint venture firm partly owned by Eskom Enterprises, already supplies the Camden power plant from its Usuthu and Golfview mines. In addition, 4 mt/y of capacity has been allocated to ‘Quattro users’ – empowerment firms that export relatively small amounts, generally less than 0.25 mt/y. The charge for usage is not expected to rise markedly from the current level of R25.16 per ton. The executive chairman of RBCT, Kuseni Dlamini, said: “The outcome of the process is firmly in line with our vision of enabling as many BEE players as possible to have access to the global coal market. We believe this will contribute to South Africa’s growth and development while enabling South Africa to increase its share of the global coal market. The process undertaken is the first clear indication of what the real South African coal export capacity demand is and this has definitely exceeded our expectations.”

Sound business case The size of the capacity applications in the tender seems to indicate that the expansion will be badly needed. Domestic coal consumption is still rising, partly because three mothballed coal fired power plants are being brought back on stream. The last unit of the 1,520MW Camden plant is due to come on stream by March 2008, the 1,200MW Grootveli power station is due to be fully operational by the end of 2009, while the 1,000MW Komati plant should be complete by the end of 2011. However, some additional power generation capacity is also being provided by new gas fired plants and the mining sector is benefiting from increased investment, so Pretoria is convinced that more coal will be made available for export. The European Union remains a key market for RBCT but the port is currently benefiting from its location on the Indian Ocean to increase its exports to East and South Asia. The government predicts that exports will increase from 72 mt/y

Richards Bay

Doing more with less

Any future expansion of coal terminal facilities at Richards Bay must take into account the redevelopment of the port’s bulk terminal. Bosch Projects has been awarded a contract to upgrade the facility, which is operated by South African Port Operations (SAPO) and which offers five export and three import berths. Although far less well known than RBCT, it handles about 12 mt/y of freight, although this is lower than design capacity. Bosch Projects has already developed an alumina import facility and coking storage capacity at the port. The business director of Bosch Projects, Dave Chappelow, commented: “The Richards Bay port’s dry bulk terminal, which was built in 1976, has large sections still operating with the original aged equipment and is struggling to cope with increasing demands. Efficiency levels are now reported as being at about 60% of the designed capacity.” He continued: “In close conjunction with SAPO, Bosch Projects is geared to restore the bulk terminal to its former operational capacity, when it was dubbed ‘the Singapore of South Africa’ because of its high productivity levels.”

today to 116 mt/y by 2020. Although Matola Coal Terminal in Mozambique and some other South African ports could make contributions to achieving that figure, the vast bulk of the coal will be exported from Richards Bay. Although phase five is not due to be completed until 2009, Dlamini has revealed that talks on further expansion were launched in September between his company, Pretoria and the government of KwaZulu-Natal. A feasibility study into further expansion should be complete by early 2008 and a full environmental impact assessment (EIA) will follow. Dlamini said: “As a company we are committed to further growth if there is a compelling business case for it. The investigation will therefore focus on determining expansion options available, which can be supported by a sound business case for the increased capacity. RBCT remains committed to its strategic vision

Left: Total handling capacity at Richards Bay, the world’s largest coal terminal, has increased by 13 mt/y, with the new South Dunes Coal Terminal (SDCT) contributing a further 6 mt/y.

Moreover, additional capacity needs to be added to the railways that connect Richards Bay with the country’s main coal mines if exporters are to take full advance of the phases five and six investment. There were a number of derailments during 2007 that cut exports from Richards Bay but the South African rail parastatal, Transnet Freight Rail, has already increased carrying capacity to RBCT from 1.05 mt a week at the start of 2005 to 1.43 mt a week by late 2007 and plans to boost this figure still further to 1.5 mt a week by the first quarter of 2008. Siyabonga Gama, the chief executive of Transnet Freight Rail, said: “We are consulting customers on their volume aspirations and their ramp up schedules and where their facilities are located and entering into contractual obligations with mining companies.” Transnet Freight Rail is committed to increasing the proportion of coal carried by rail rather than road over the next five years but the number of locomotives and rolling stock has actually fallen by about a third since 2004. Over the next five years, 514 locomotives will be refurbished but the company has decided to replace many of its existing engines with more powerful locomotives, which will be able to pull 300 wagons rather than the current standard of 200 wagons. Electromotive Diesel of the US has been selected as the preferred bidder for 212 new diesel locomotives that will be used on Transnet Freight Rail’s dry bulk services. Molatwane Likhethe, Transnet Rail Freight’s spokesperson, said: “The plan is to have a smaller but more capable fleet. We want to be able to do more with less.”

of satisfying the aspirations of all sustainable export coal producers.” Although other coal exporting nations are also investing in port capacity, RBCT expects the continued expansion of its facilities to boost South Africa’s overall share of the global coal market. This will create jobs in both the port and mining sectors and also create opportunities for black empowerment companies to grow alongside the sector’s established players. Dlamini says: “RBCT plays a key role in enhancing the global competitiveness of South Africa’s export coal sector and to this country’s growth and development objectives. “This expansion will increase our contribution to South Africa’s export earnings and thus contribute to reducing the country’s trade deficit.” As a result, the industry should help to ensure that South Africa maintains its current economic progress.

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