| Thu 27 Jan 2005, 12:17 | | Big expansion for iron-ore export rail link to Sal |
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Big expansion for iron-ore export rail link to Saldanha
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Kumba and Transnet agree in principle
Resources Editor
SA`s largest iron-ore producer, Kumba Resources, said yesterday it had agreed in principle with state transport parastatal Transnet on a major expansion of iron-ore export capacity on the railway link between its Sishen mine in Northern Cape and the port of Saldanha.
The agreement had been under negotiation for months, but Kumba declined to give any details of the new financial structure.
`This is a concern,` said a local mining analyst.
`They have told us they have moved from the previous dollarrelated contract, which was losing Transnet money, to a new randbased contact.
`But it is logical that if this deal is good for Transnet, it can`t be as good for Kumba.
`My suspicion is that Kumba has had to agree to pay more, in return for the extra rail capacity.`
Kumba said yesterday the new rand-based tariff `caters for Kumba`s current growth plans to increase iron-ore exports` on the line between Sishen and Saldanha.
A Kumba spokesman said the new agreement would make `a positive contribution` to the growth of SA`s iron-ore industry, and would enhance the co-operation between Kumba and Transnet.
Kumba has in the past offered to help provide financing for the rail upgrade, which would involve the purchase of additional trains.
A Kumba spokesman said the offer remained on the table `and Kumba will support Transnet in any way that is needed`.
However, he was reluctant to say to what extent Transnet would be prepared to enter a public-private partnership on the Sishen-Saldanha line, saying the agreement with Transnet was very significant.
`This is highly positive,` he said.
However, the analyst said Transnet was in a strong position as it could effectively choke off ironore exports until its demands were met. `Kumba has won an exit route not only for its existing iron ore, but also for production from the planned expansion of its Sishen mine, and for iron ore from its planned new iron ore project at Sishen South, which is also in Northern Cape.`
Kumba said negotiations were continuing, and that a final agreement would be signed in the first quarter of this year, if approved by the boards of both companies.
Kumba`s iron ore from SA has become more vital to the company, after it lost an arbitration procedure in Australia at the end of last year, in a case that would have secured it a stake in the potentially lucrative Hope Downs iron ore mine.
Kumba said recently that it would be appealing against this dec ision, but if it loses the appeal a major leg of its expansion strategy would be crushed.
Anglo American bought a majority stake in Kumba last year, although the South African authorities may order it to be cut to 49%.
Kumba closed 0,90% higher at R56 on the JSE Securities Exchange SA yesterday.
