JOHANNESBURG (miningweekly.com) – State-owned Transnet and diversified miner South32 on Thursday signed a seven-and-a-half-year manganese export capacity allocation (Meca) contract, allowing for the transportation of 2.6-million tonnes a year of export manganese and realising almost R10.4-billion in total value for Transnet.

A Meca contract provides for security of exported manganese volumes to Transnet and security of export rail and port logistics to its customers.

The contract with South32 will be backdated from September 2015 and will be valid until March 2023.

The contract term is aligned with Transnet’s manganese expansion plans to create capacity ahead of demand in freight, ports, terminals and rail systems in the country.

Transnet new business development chief officer Gert de Beer explained that, as part of the Meca process, 15% of Transnet’s capacity will be allocated to new entrants in the manganese export market, to allow for industry growth and access to market.

For example, the newest entrant in manganese exports is mining company Kalahari Resources’ Kalagadi manganese mine, in the Northern Cape, which will be exporting 600 000 t/y from June as part of Transnet’s Meca process.

Allowing new entrants into the export market is essential, as South Africa accounts for close to 75% of global manganese reserves. The country is also the leading exporter of high-grade manganese ore, with exports having grown from five-million tonnes to 13.2-million tonnes in the last five years.

De Beer added that Transnet keeps in touch with the Department of Mineral Resources to pinpoint new upcoming manganese exploration projects and mining developments.

“The projects are continuously developing through the value chain. There are projects under consideration to create more common user loading facilities in the manganese region; therefore, we are working with customers to create more agile, common-user type access through the core rail infrastructure,” he noted.

Further, Transnet plans to sign similar take-or-pay contracts with local manganese producers, which will see a total of 12.5-million tonnes a year of manganese transported mainly from the Hotazel area, in the Northern Cape, through the Saldanha and Port Elizabeth ore railway lines – which will see updates (as part of Transnet’s manganese expansion programme) in the rail network between Hotazel and Coega, in the Eastern Cape, as well as the provision of a new bulk terminal at the Port of Ngqura.

“The take-or-pay contracts do not only state what we will do if things go wrong, but it is a detailed contract that commits the two companies to how they will deliver their service, how much capacity is available and what tonnages we will move – creating credibility for stakeholders of both companies and financial security for Transnet, which sustains infrastructure, assets and solutions through its own balance sheet and not the fiscus,” De Beer enthused.

South32 South Africa manganese operations VP Lucas Msimanga commented that the company is pleased to have reached an agreement with Transnet that supports the base production plans of its manganese ore business.

“This contract provides a stable base for the execution of export sales, with no significant exposure to the business during market downcycle,” he said, with De Beer adding that it effectively derisks Transnet, especially in volatile commodity markets, while South32 is provided with clear (minimum volume) production targets through which they can comfortably manage fluidity in the market.

“Essentially, we commit to a consistent base load,” concluded Msimanga, adding that the contract underpins the value and commitment of both businesses that have managed to grow consistently together.