JOHANNESBURG (miningweekly.com) – A lower-cost, higher-capacity manganese export route is needed to allow South Africa to compete, says BHP Billiton CEO Marius Kloppers.
"We basically have a logistical constraint, which prevents South Africa from taking market share from other producers," Kloppers tells Mining Weekly Online.
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, Kloppers says.
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 able to offer rail and port capacity of up to 4,4-million tons of manganese ore a year.
"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.
"In addition, the current export route is logistically fairly expensive and also from a cost competition point of view, it's sometimes, particularly in depressed scenarios, difficult for the South African producers to compete.
"I think that the solution that we need to see, and I really don't want to say exactly how it will work out, has got to be something that is both lower cost and higher capacity, and may entail significant capital investments in order to get there," South African-born Kloppers says.
In developing a case for a better manganese transport corridor, Kloppers says that it is useful to reflect on BHP Billiton's view on social development.
"Our view has always been that new investment drives new opportunities," he says.
New investment in a new manganese rail route would, he says, create new opportunities for black economic-empowerment (BEE) transactions, as new investment would need new BEE partners, and the new investment would also create job opportunities.
"We emphasise that and we talk about that a lot. One of the things the manganese business has been working on is that, if we want to grow structurally our manganese business, off a very, very good resource base - not only our resource base, but South Africa's resource base - it is important that we, in due course, find another export route, with more capacity.
"We look forward to continuing to working with all of the people, other producers, service providers and so on, towards making that a reality," says Kloppers.
BHP Billiton manganese president Peter Beaven notes that there is more rail demand than there is rail capacity, which presents a very fundamental business case.
"In addition to that, we have to find a lower cost option. Those are the discussions we are having, in a very cooperative fashion, with Transnet, and we are really very pleased with that, and with Transnet's attitude."
Beaven tells Mining Weekly Online that, after a lull, manganese sales are picking up: "We are back into selling some product now. The Chinese are reaching the end of their restocking phase and the markets in Europe and the US are starting to come back to life again," he says.
BHP Billiton is among three companies to which Transnet last week allocated port and rail manganese ore export capacity on the port of Port Elizabeth's export channel.
The allocation is to BHP Billiton's empowered Hotazel Manganese Mines (HMM). The other two companies to receive allocation are the Russian-linked United Manganese of Kalahari (UMK) and South Africa's Assmang.
Auditor KPMG oversaw the allocation process.
"Given the fact that, as matters stand, demand for capacity outstrips the available capacity, it is vital that aspirant clients have confidence in the fairness of the capacity allocation process," says Transnet acting CEO Chris Wells.
Wells adds that UMK, Assmang and HMM have "significant BEE credentials".
The allocation to the three companies forms the first phase of the allocation process, which runs to 2013.
Simultaneously with the allocation process, Transnet says that it is exploring expansion plans based on various feasibility studies, on the most appropriate funding options.
"As we gear up to increase capacity, we will continue to work with the industry to allocate capacity in a manner that is fair and transparent and seeks to engender competition and the transformation of the South African manganese industry, which controls 80% of the world's manganese reserves, to being a globally competitive one," says Wells.