Exxaro Resources, one of the country’s largest coal producers which recently announced a multibillion-rand expansion programme over the next two years, yesterday raised concern that the poor state of the rail infrastructure was hindering export potential.
During a media briefing held yesterday, Exxaro’s executive manager, Mxolisi Mgojo, said: “The market is there and so are projects, but there is not enough rail capacity.”
The capacity for the rail network to export is 63 million tons, however, Transnet plans to increase this to 81 million tons by 2014. Transnet spokesman Mboniso Sigonyela said: “Transnet is addressing capacity on the coal line. We have received board approval for expansion from 63 million tons per annum to 81 million tons.
“This is part of our current five year capital investment programme worth R93.4 billion. We expect the expansion to be complete by 2014.”
Exxaro, which has a capacity of 45 million tons a year, announced plans to set up an iron ore operation in the near future either in west Africa or Australia.
A consultant in the mining industry said that the company had coal resources and could make a fortune by producing iron ore, instead of selling raw materials.”
She commended Exxaro for its aspirations toward clean coal, as well as new technology that would improve production and upgrade beneficiation processes.
Chief executive Sipho Nkosi said members of the board had approved the construction of the Fairbreeze project in KwaZulu-Natal, on which R2.4bn would be spent.
A total of 1 050 jobs would be retained, while R500 million would be spent on securing procurement in the area. The life of mine was expected to be 12 years, but could go up to 18 years, he said.
The mine is expected to annually produce 500 000 tons of ilmenite, 60 000 tons of zircon, and 25 tons of rutile.
Nkosi said the Grootegeluk Medupi Expansion Project was 41 percent near completion stage. “We are not going to exceed the R9.5bn budget, we expect the first coal to be supplied in the second quarter of 2012, with full production in the second quarter of 2014.“
The Medupi coal supply and offtake agreement became unconditional and binding between Exxaro and Eskom on June 24 2010. In terms of the agreement, Exxaro will supply 14.6 million tons a year to Medupi power station for a 40 year period post ramp-up.
The total capital cost of the Grootegeluk mine expansion is forecast at R9.5bn.
First coal delivery will commence in May 2012 and full commissioning is expected during 2014/15. Project detailed design is nearing completion and the design will be largely completed by the end of this month.
Financial director Wim de Klerk said that 300 people would be affected by a restructuring process that would be implemented in the second or third quarter of the year. At the moment Exxaro was consulting with unions, and would involve the CCMA for mediation.
The company, which is listed on the Johannesburg Stock Exchange, reported a fivefold increase in full-year profit as commodity prices gained and a write-off was not repeated. Group consolidated revenue increased by 14 percent to R17.2bn due to generally higher sales volumes and commodity prices despite the impact of a stronger local and Australian currency.
Net income rose to R5.21bn in 2010 from R1.02bn a year earlier. Profit more than doubled when excluding the 2009 impairment on the company’s KwaZulu-Natal Sands project, said the company.
The company’s shares lost 2.32 percent to R147.50 on the JSE yesterday. - Business Report
