MINING & MINERALS
FREIGHT & TRADING WEEKLYJANUARY 2011
‘Commodity losses are NOT an acceptable trading hazard’
Commodity demand – have we recovered from the recession wobble?
Cutting the cost of mining
VR Steel’s John van Reenen reveals the secret
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CONTENTS
Cover: John van Reenen, VR Steel - page 2.Photo: Shannon Hill
Editor Joy OrlekConsulting Editor Alan PeatAssistant Editor Liesl Venter Advertising Carmel Levinrad (Manager)
Yolande Langenhoven Gwen Spangenberg Jodi Haigh Division Head Anton MarshManaging Editor David Marsh
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Shipper profileInnovative dump truck cuts the cost of mining .................................2
Security‘Commodity losses are NOT an acceptable trading hazard’ .............4
CommoditiesEnergy minerals spearheading the region’s growth ..........................6
Optimism over sustained commodity demand ................................18
‘SA coal producers will struggle to meet demand’ .........................20
LogisticsRegional network makes the difference ..........................................12
CWT acquisition adds muscle in Africa .........................................12
Satellite tracking ensures transport safety .......................................14
Increased investment bodes well for Zambia ..................................14
MiningAfrican states moving away from nationalisation ..........................16
ShippingBulk in boxes on the up ....................................................................8
Port operators dig deep to cater for growth ......................................8
Distance from ports poses logistical puzzle ....................................10
New services cater for growing commodity exports ......................16
The opening up of new mines on the back of increased global demand for commodities is good news for the freight industry.FTW takes a closer look at this vibrant sector.
Page 4
Page 12
Page 16
Page 8
2 Mining & Minerals January 2011
www.ftwonline.co.za
By Liesl Venter
The mining industry very nearly lost its silver lining during the global economic meltdown but when the going gets tough,
the tough get going.Leading the pack is mining equipment
manufacturer VR Steel which recently took home the prestigious international Swedish Steel Prize in Stockholm.
In his office in Alrode, Germiston, managing director John Van Reenen is more than proud of the achievement – regarded as the “Nobel Prize” for innovative design engineering.
The prize-winning invention – a lighter, more durable off-highway dump truck, has made a real difference to the cost of mining, says Van Reenen.
Using high strength and abrasion-resistant steel in the truck body it reduces the weight of the vehicles, lowers the operating and maintenance costs and has less impact on the environment due to the truck’s reduced diesel consumption.
Van Reenen has come a long way since he founded the mining equipment manufacturing business that would become VR Steel in 1977. An accountant by profession, by the age of 25 he had worked for three different companies. “And essentially I had been asked to leave all three. I did not have much of a CV and was not very employable, so I started my own company.”
He has never looked back. “The reason I was essentially fired from my first three jobs was because I wanted to do things differently and bring about change and it was just too revolutionary for the times.”
But at VR Steel innovation is key. “Here we do things differently all the time and move the goal posts all the time. If you are not innovative you will never be able to hold your
place. It is key for success.”While small compared to some mining
equipment manufacturers, VR Steel is a leader when it comes to engineering design, says Van Reenen. The first to determine how multiple size particles flow into a truck and out again, the company has been involved in earthmoving attachments since 2004.
But despite these successes Van Reenen admits that as an exporter the company has found itself at its wits’ end.
“South Africa is a hopeless exporting country for two reasons. The first is our non-productive workforce and second the fluctuating rand. You just can’t get a quote that is going to hold up. From the start of a sale to actual delivery can take a year and with the rand that has serious implications.”
A recent contract to the value of $1.2 million saw the company lose 28% by the time of payment solely due to the fluctuating rand.
It is for this very reason that Van Reenen is looking at setting up a manufacturing site in Zimbabwe near the Beitbridge border post. “We have made applications and are hoping to have the factory up and running before the end of 2011. It just makes more financial sense, but it also expands our African presence.”
With prices in some commodities having improved so much that they are now beyond the 2007 levels, there is a huge drive and focus on mining in southern Africa.
The Zimbabwe factory will place the
company in a better position to handle these expanding markets.
“Zimbabwe will grow into a huge mining industry,” predicts Van Reenen. “If we get in now we are in a prime position to benefit as we will be ready and already in the area.”
With one of its biggest customers already in the Musina area, the new factory is set to benefit the company all round.
“Manufacturing big equipment pieces close to intended clients delivers huge savings to both the client and the manufacturer.”
That is why the company also boasts a manufacturing plant in China where they build for the Chinese market and export to Australia and surrounding areas.
When it comes to mining and minerals he says an expected boom for at least the next ten years is expected. “We must capitalise on it and make sure our exporters benefit from the good times. That way they are more able to cope when we do have economic downturns.”
The company also recently joined forces with Pingshuo coalmine in the north west of China where it will deliver equipment to the mine for the next couple of years.
He says at least 36 large truck bodies and up to three or four dippers (rope shovels and buckets) will be produced annually at the Chinese facility. “It is about finding opportunity and establishing a relationship with your clients,” says Van Reenen.
Innovative dump truck cuts the cost of mining… and wins coveted global award for design engineering
SHIPPER PROFILE
John Van Reenen ... innovation is key.
John van Reenen is a strong believer in giving back to the community.
Along with his wife, Bhawna Gulab, they established The Building Exciting Education Trust (BEE) to upgrade primary schools in underprivileged areas of
Johannesburg and Cape Town.The main focus of BEE is
to give children, many from squatter camps in the areas, hope that they can aspire to better living standards, and to make their schools a place where they would like to spend more time. Schools are chosen from the
very poorest areas, which typically have no maintenance expenditure allocations. BEE employs unemployed parents of the schools as tilers, carpenters, plumbers, electricians and general labourers. It supplies all the materials, and supervises the upgrading of classrooms,
toilets and school grounds.Funded mostly out of their
own pockets Van Reenen says education is the basis for success.
“That is why we as a company have been successful, because we are always learning and therefore we are innovative.”
Giving back to the community
‘South Africa is a hopeless exporting country for two reasons. The first is our non-productive workforce and second the fluctuating rand.’
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4 Mining & Minerals January 2011
roadfreight security
By Liesl Venter
“High commodity theft remains a high security risk in South Africa and is increasing all the time,” says Smith. “High value commodities that have commercial value, that are easy to sell and not easy to trace remain targets.”
Kelly agrees. When transporting high value commodities many transporters ensure they have escorts when travelling, he said.
“Copper, for instance, remains a big target in any one of its formats – from the ore to the finished product be it a cable or a wall hanging. There is a huge market for it and it is sold very quickly after being taken.”
Smith advises anyone transporting minerals – non-ferrous metals or any other valuable item – to take on the services of a reputable risk management company to analyse the risk and supply solutions.
“The industry still perceives losses as an acceptable trading hazard in Africa and even builds the cost of possible losses into their pricing structure,” says Smith. “I believe that
by applying proper risk management solutions, cost benefits to the industry can be huge.”
According to Kelly it is important to remember that the theft of commodities is a highly organised business. “There are major syndicates at play who know what they want and how to get it.”
He says some areas can best be described as the “Bermuda Triangle” where a truck disappears never to be seen again. “This is not
called organised crime for nothing. They have the means to find the tracking devices, to scramble them and to hide a truck for days on end. It is very sophisticated.”
A worrying trend, says Kelly, is that some 70% of copper hijackings that have been taking place have occurred south of Beitbridge. “There is a problem in our country and we must address it. Of course we advise our truck drivers to only stop at designated truck stops where there is enough
light and to not leave trucks and loads unattended – but the criminals seem to stay ahead of the game.”
He says what has been increasing of late are incidents where date rape-type drugs have been used.
“We have had several incidents where truck drivers remember having a cup of coffee and waking up the next day with their entire load gone, or the truck standing on bricks – or even in some cases they are found lying in a ditch. This is increasingly happening at truck stops.”
Kelly and Smith advise transporters of high value commodities to ensure that their vehicles are being tracked, to remain in contact with their employers and to avoid hot spots and roads known for being targeted.
Says Kelly,” Everyone is doing their best to ensure the safe transportation of goods, but there have to be meaningful partnerships between the private sector and the investigators of crime as well as the prosecutors if we really want to make a difference. It starts by fixing the small things.”
‘commodity losses are Not an acceptable trading hazard’
Tiaan Smith … ‘Avoid hot spots and roads known for being targeted.’
Tiaan Smith of CPI Risk Management Solutions and Gavin Kelly of the Road Freight Association offer their advice on the safe transportation of commodities especially in Southern Africa.
Gavin Kelly … ‘There have to be meaningful partnerships between the private sector and the investigators of crime.’
By Ed Richardson
The Cold War may be over – only to be replaced in Africa by the colonial-style scramble for mineral riches.
This new scramble for Africa is revealed through Wikileaks documents.
US assistant secretary of state for African affairs, Johnnie Carson, told oil executives in Nigeria: “China is not in Africa for
altruistic reasons. China is in Africa for China primarily,” he said, according to a confidential cable written by the US consul-general in Lagos in February.
African leaders are not spared in the “leaks”. The illicit diamond trade in Zimbabwe has led to the murder of thousands, enriched those close to President Robert Mugabe, according to US documents in which a British mining
executive is quoted.Corporates also come under the spotlight
– with BHP Billiton being accused of sabotaging an investment by China’s Chinalco in rival Rio Tinto. Cables sent from Federal Treasurer Wayne Swan’s chief of staff to US officials describe how BHP “played its cards with consummate skill” in lobbying the government to delay a decision on a deal between Rio Tinto and Chinalco.
Wikileaks on mining in Africa
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By Joy Orlek
The biggest current area of opportunity on the continent is in energy minerals, says Whitehouse & Associates’ Duncan
Bonnett – and that includes oil and gas.“In terms of coal, outside of South Africa
you’re looking at Botswana, Zimbabwe and Mozambique where there’s an incredible amount of exploration going on at the moment and driving huge infrastructure development in Mozambique and eventually through into the rest of the region.
“In the next five years coal exports are likely to increase from virtually zero to 20 million tons or more exiting Mozambique. Those ports and that infrastructure is undergoing a fundamental realignment and upgrade and that bodes well for countries like Malawi, Zambia, the Congolese Copperbelt and Zimbabwe.”
Uranium is another area of significant potential.
“There are probably at least 60 exploration and developments projects under way at the moment in Niger, Congo, Central African Republic – and we’re now starting to see Namibia, Botswana, Malawi and further afield coming on stream.
“This is based on the premise that nuclear power will be built in the next few years that will require uranium. Much of this will be in Asia, but also in Europe as nuclear becomes more attractive again. We are also looking at nuclear power plants in Africa so there will be a regional component.”
In terms of oil and gas, Ghana is now coming on line. “Twenty years ago the country had very little to offer but it’s
now a major gold producer and that has underpinned a lot of confidence in the economy. “Once the oil kicks in next year it will reduce the country’s dependence on the import of oil, promoting downstream beneficiation.”
But the most exciting potential, in Bonnett’s view, is the Great Lakes region.
“The Ugandans are trying to set themselves up as the energy and oil hub of East Africa.
“And that requires the building of new towns, new power infrastructure, roads and pipelines.”
One of the downstream impacts of that is the cement industry. “At the moment there are over 30 different cement projects in southern Africa at different stages of development. A number are not related to the mining industry but rather to the availability of disposable income, with people moving from mud houses to concrete breeze blocks and steel sheeting to build their accommodation.”
According to Bonnett, one of the biggest handbrakes on the development of infrastructure in Africa previously has been the lack of readily available cheap cement – an issue that is now being addressed.
And when you’re talking mining and minerals, copper is always a key component.
“When the global crisis kicked in a lot of expansion projects in the Copperbelt were put on hold or cancelled. That has turned around and despite the worst financial crisis prices are still relatively speaking robust, underpinning a lot of confidence going forward.”
Emerging market economies – like China and Brazil – are growing at a pace that creates demand for African commodities.
And infrastructure development appears to be making gradual progress.
“It’s an incremental process. President Jacob Zuma is driving the north-south corridor – a critical corridor from Dar es Salaam through the Copperbelt and down to the Port of Durban. “The UK development agency has spearheaded the donor drive to find funding for projects on this corridor. But with eight or nine countries involved the biggest issue is getting the political alignment correct.”
As always, the challenges are monumental but the rewards are even greater.
Energy minerals spearheading the region’s growth
Duncan Bonnett ... ‘We are also looking at nuclear power plants in Africa.’
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8 Mining & Minerals January 2011
SHIPPING
The movement of bulk as containerised cargo is once again on the up after a slow-down during the global recession,
says Safmarine’s recently appointed Johannesburg-based national commodity manager, Steven Simpson.
A major player in the movement of containerised commodities such as chrome, ferrochrome, copper, zinc, nickel, cobalt and iron out of South Africa to the Far East, Safmarine is expecting strong volumes for 2011, he told FTW.
And the containerised metals and minerals export trade is a valuable contributor to the line’s business, Simpson added. While many lines view this as ‘backhaul cargo’ or simply a way to fill the ships on the return voyage to the Far East, it’s a strong area of focus for Safmarine.
“Recognising the importance of these shipments to our business we have taken the time to get to know the industry, particularly its supply chain challenges, and to establish partnerships that add value to both our
business and our customers’ businesses,” said Janine Nainkin, national dry exports and capacity manager,
Simpson, who has been with Safmarine for the past six years, has full pricing authority and is coordinating Safmarine’s efforts in the commodity export market.
Equipment supply is key priority for Safmarine, she added. “We believe in staying close to the market because doing so allows us to monitor the flows and better manage our equipment.
“Commodity exports is a volatile business and it’s very important that our customers have the confidence in us to meet their equipment needs. Having the boxes available when our customers need them is a key priority in this business.”
By Ed Richardson
Ports around Africa are being upgraded to meet demand from mining operations – with a positive knock-on effect for other importers and exporters.
Mozambican ports and supporting railway infrastructure are being modernised to cater for millions of tons of coal which will be mined in the Tete province.
New or upgraded coal terminals are planned for Maputo, Beira and Nacala.
The rebuilding of the Nacala port and supporting road and rail infrastructure reaching into Malawi will open up that land-locked country for mining operations as well.
Further up the East Coast, the Kenya Ports Authority is constructing a new berth in the port of Mombasa, while Rift Valley Railways is investing in track upgrades, rolling stock and locomotives.
The port is used for the export of soda ash.
Neighbouring Tanzania is planning to build three more ports to meet demand for increased capacity from the country and its neighbouring states.
Currently, Dar Es Salaam is the main import-export port for Zambia and Congo’s Katanga province.
On the West Coast, Namibia continues to invest in the port of Walvis Bay to support both the local mining industry and that of the Copperbelt.
The Angolan ports of Luanda, Namibe, Lobito and Cabinda are all being upgraded – in part to speed up the export of mining commodities. Luanda and Namibe are used for the export of iron ore.
A joint venture led by Bolloré Africa Logistics has started work on upgrading the Congo Terminal, the new name of the container terminal in the port of Pointe-Noire (Congo Brazzaville).
The goal is to make Pointe-Noire the benchmark deep-water port for Central Africa, both as a major transhipment terminal and also as the main port for hinterland transits (import and export) in the Congo basin, opening to the principal corridors of the sub-region, in particular serving the (mineral-rich) Democratic Republic of Congo, the Central African Republic and the north of Angola, says the company.
The private sector is also involved in Nigeria, where the Nigerian Ports Authority is being “partially” privatised through the granting of concessions to port. A new port is under construction at Onne, some 25 kilometres south of Port Harcourt. Oil dominates exports from the region.
In West Africa, the modernisation of Guinea’s largest harbour, Port Autonome de Conakry (PAC), has begun. Traffic has been rising steadily to meet the demands of mining projects, and the port is now congested.
African Minerals is financing the upgrading of the port of Pepei in Sierra Leone, as well as the railway line to Lunsar to serve its own mine at Marampa and an iron ore mine operated by China Railway Materials Commercial Corporation in the same region.
APM Terminals, the port operating unit of AP Moller Maersk, has been named the preferred bidder for the concession to operate the Liberian port of Monrovia. Liberia has large deposits of iron ore.
APM has pledged to invest US$120-m in the port over a 25-year concession period.
Bulk in boxes on the up
Port operators dig deep to cater for mining industry growth
Steven Simpson ... ‘Coordinating Safmarine’s efforts in the commodity export market.’
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10 Mining & Minerals January 2011
SHIPPING
By Alan Peat
The big players in the SA mineral export league are coal, manganese ore and iron ore, and all suffer from a similar logistical
complaint. They are all mined a long way away from seaport gateways.
This, according to Iain McIntosh, trade and marketing director of Mitsui OSK Line (MOL), has given each of them landside and maritime puzzles to play with, if they wish to remain competitive in an extremely price-sensitive global marketplace.
SA steam coal exports, unfortunately, suffer from a weak link in the landside leg of the supply chain from the inland mines to the coast.
Though McIntosh described the main export gateway of the Richards Bay Coal Terminal (RBCT) as a very efficient player, it is not being allowed to be the star it could be.
In spite of the global seaborne coal trade increasing from 510-million tonnes per annum in 2005 to an estimated 679-mtpa in 2010 (a 33% increase), SA exports have just not kept pace with this growth.
Indeed, McIntosh added, it has in fact registered a net decline of 7-mtpa since 2005. This in spite of RBCT design capacity moving from 76-mtpa in 2009 to 91-mtpa in early 2010 with its phase V completion.
“Much of this failure to deliver greater export throughput,” he told FTW, “is due to the Transnet Freight Rail (TFR) coal line which has seen declining performance in recent years.
“It has guaranteed to rail 65-mtpa (with an
‘aspiration’ to reach 68-mtpa) in 2010. But the medium-term aim to reach 81-mtpa is unlikely before 2013-2014 – so there is still some way to go.”
It’s somewhat better news on the manganese ore front – although it still has to travel over 1 000-kilometres from its source to the coastal seaport outlets.
And SA is one of only a few suppliers of this valuable ore – boasting some 80% of global reserves, and well ahead of the other important manganese deposits in Ukraine, Australia, India, China, Gabon and Brazil.
“Demand over the period 2010-2015 looks likely to provide significant volume growth but there are challenges,” McIntosh said.
“It comes from a considerable distance from the ports and requires a good supply chain to port to keep down free on board (FOB) costs.”
It is mined in the north-west of the country in the Kalahari Manganese Field (KMF) and the ore is despatched by train from Hotazel – either through Port Elizabeth or Durban – with some also moving by road into Johannesburg.”
Volumes are set to reach over 5-mt in 2010 after a weaker 2009 due to lower demand.
“Whilst Durban moves around one million tonnes, and quite a sizeable volume is containerised (approximately 15%),” McIntosh said, “the main gateway for bulk exports remains through the Port Elizabeth manganese bulk terminal which is the closest to the mining area in distance (about 1 100-km).”
As the inadequacy of the coal line proves, the essential driver for available tonnage for
exports is a good rail system.The TFR rail network provides capacity of
13 100-t per day – which, in practice, translates to 4.6-mt per annum.
“The PE port handled 3.2-mt of bulk ore during 2009 and is expected to exceed 3.5-mt in 2010,” McIntosh said, “so there is room for further growth in port volume given the rail capacity available.”
While capacity from the mines through all channels is currently restricted to around 6-7-mtpa maximum, McIntosh said that the potential annual demand from the mines in the shorter-term is more in the region of 14-mtpa. “A number of developments are under way to realise this potential,” he added.
Transnet is currently casting an eye on the newly-opened port of Ngqura (27-km from PE) with its 14-metre draft as an alternative bulk loading outlet.
Meantime, the SA supply of iron ore comes largely from the Sishen field in the Northern Cape – and is all exported via the Orex rail line (861-kms) through the bulk port of Saldanha. The distance the ore travels is 2-3 times longer than major competitors in Brazil and Australia – and gives them a competitive edge in transport costs.
However, Transnet has embarked on a major upgrade programme to improve handling capacity and reduce transport costs.
“The project also includes an upgrade of the rail line – which is designed to increase Saldanha’s original capacity of 28-mtpa to 60-mtpa,” McIntosh said.
Distance from ports poses logistical puzzle for coal and oreTFR holds back coal export performance
The Port of Saldanha’s ship loaders are fed by a conveyor belt system from a semi-automated tandem rotary tippler, which can deliver 200 tonnes per tip.
The ship loaders’ design capacity is 8 000 tonnes per hour. This makes the iron ore export port one of the global best in handling, and with the ability to do a fast turnaround of vessels in two-to-three days maximum.
FTW2105SD
12 Mining & Minerals January 2011
By Alan Peat
Moving project cargo into Africa for the mining industry has become a major speciality for the shipping
and forwarding operation, Multilog.And, according to major client Ken
Green, group supply manager for Randgold Resources, this has become a highly efficient exercise.
Multilog’s most recent and future mining projects include the Morila and Somilo (Loulo) gold mines in Mali, as well as the mines at Tongon in the Ivory Coast, Kibali in the DRC, and Gounkoto in Mali.
In a recently completed mining project, Multilog transported 63 000 freight tons of cargo from ports around the world via African ports to various points within the continent. This eight-month project included cargo from Australia, Singapore, Malaysia, Jeddah, Europe and North America.
“As you can imagine,” said Multilog project development executive, Richard Quinton, “there are many factors when moving such large volumes of cargo – as well as the precision it takes to arrange the transport of such cargo.
“Multilog has managed to successfully purchase and ship the specialised equipment needed to move heavy and large objects within a meagre two-week time frame.
“The purchase of this equipment, its on-time delivery and the arranging and co-ordination of between 194 and 221 vehicles per vessel, have proven to be
invaluable to our clients – as, in mining, time is money.”
The company’s chain of offices in Johannesburg, Senegal, Mali, Guinea-Conakry, Ivory Coast and Ghana allows it to optimise, implement, operate and manage any element in a supply chain,
according to Quinton. “We have the ability to communicate
effectively with the country members. This gives our clients the upper hand in the transport of their goods, and the benefit of having just one logistics operator to oversee the entire supply chain.”
Expanding its commodity business in Africa was the motivation behind the recent purchase by integrated logistics solutions provider CWT Limited of a 60% stake in Aquarius Shipping International.
It’s a strategic move to strengthen its commodity logistics capabilities and business network in the Africa region, a CWT spokesman said.
The CWT Group offers commodities logistics services through its wholly owned
subsidiary CWT Commodities which specialises in the handling and storage of ferrous and nonferrous metals, soft commodities, plastics and energy products.
Since its establishment in 1997, logistics company ASI has served most of the world’s major tobacco companies. It also works with a select group of commodity brokers and suppliers.
CWT foresees great synergies from this strategic acquisition, the spokesman said.
“With its established business network and management team’s vast local knowledge, ASI will further expand and strengthen the Group’s commodity logistics business in Southern and Eastern Africa.
“The existing ASI network and capabilities will help escalate the business growth in Turkey as well as facilitate the expansion of its commodity-related value added services into the African continent,” he said.
CWT acquisition strengthens commodity business in Africa
Regional network makes the difference for forwarder
Preload inspection of 103-ton mill shells in Vereeniging transported from Duncanville and shipped via Richards Bay to Dakar, Senegal. They were hauled 1000km east to the Loulo mine site in Mali.
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14 Mining & Minerals January 2011
www.ftwonline.co.zaLOGISTICS
By Liesl Venter
Zambia, internationally recognised as a major producer of copper and cobalt, is expected to see increased investment in the coming year as efforts continue to rebuild the copper industry following the global economic meltdown.
Chris Chiinda, director of Cee Cee Freight & Suppliers, whose services range from customs clearing and forwarding to transport logistics throughout South, East and Central Africa, is upbeat about 2011.
“The falling copper prices and falling production due to declining world copper demand and the recent global economic crisis definitely highlighted the country’s reliance on copper, but then the price of copper in 2010 rose to almost $9000 per ton, which was very good for Zambia.”
Chiinda says the privatisation process launched in the country has already led to a significant inflow of investment to the mining sector, and a reversal of fortunes is confidently predicted for the copper mining industry for 2011.
“With more investments expected to rebuild the copper industry, and corresponding production increases of refined copper, Zambia could once again become one of the top four or five copper producers,” he says. “The mining industry has faced challenges such as slow global economic growth, labour unrest, transportation difficulties – including port congestion – and shortages of spare parts, raw materials and fuel, but despite this there are immense opportunities.”
From the exploration for new mineral deposits to gemstone cutting and polishing, the establishment of new mines and even reclaiming copper from slug tailing dumps, Zambia’s mining sector remains one of opportunity, he added.
By Liesl Venter
Much is expected from the mining and minerals industry in 2011, says Luis Junaide Ismael Lalgy of Lalgy Transport.
“The expectations for the next few years are very positive and judging by recent contracts we have a very positive outlook. We have already been contracted for huge quantities and are expecting more mineral contracts in the next few months.”
Mainly transporting third party goods within Mozambique and other SADC countries, Lalgy Transport believes the huge volumes of minerals to be moved to ports in the area remain a major opportunity for companies such as themselves in the coming years.
“We saw volumes drastically improve in 2010 where we started with about 10 000 tonnes per month. By the middle of the year this had increased to over 30 000,” says Lalgy.
With the demand for chrome concentrate, chrome lumpy, chrome chips, nickel concentrate and coal remaining high, Lalgy says there are opportunities especially if one takes the Ports of Maputo and Beira into consideration for overseas transactions made by the minerals institutions in Mozambique. “The extraction market is growing very fast and more and more transport means are required to move it,” says Lalgy. “Moreover, the developments taking place around the world require more minerals to be produced.”
He says when transporting minerals it is important to guarantee safety to customers. For
that reason the company has implemented a satellite tracking system that allows immediate tracking and follows the vehicle at all times. “The software is user-friendly and Internet based and can be used wherever it is required. It sends messages of any incidents to emails or phones and there is therefore constant communication.”
The company has also taken operations a step further by implementing a 24-hour a day, seven days a week policy to avoid delays.
Increased investment bodes well for Zambia
Satellite tracking ensures transport safetyLalgy upbeat about 2011 prospects
Luis Junaide Ismael Lalgy … ‘Drastic improvement in volumes last year.’
By Ed Richardson
Africa’s commodity boom has come to an end, and both mining companies and governments will need to plan around lower prices for the next 20 years, according to the World Bank’s Global Economic Prospects for 2009 report, which has the theme “commodities at the crossroads”.
“Like earlier commodity booms, this one has come to an end,” says the report, pointing out that prices in all commodity markets started falling sharply in July 2008, reflecting slower GDP growth, increased supplies and revised expectations.
“Because commodity prices reflect forward-looking expectations, the sharp slowing of
growth that is expected over the next year has caused prices to decline rapidly even though the underlying supply and demand tensions are little changed from just a few months ago when these prices were close to all-time highs,” says the report.
The good news is that, “while much weaker GDP growth is projected to cause commodity prices to ease further in the short run, they should nevertheless remain higher than they were during the 1990s.
Producers may have to wait a while for the next boom: “Over the next two decades, slower population growth and weaker (though still strong) income growth are projected to cause global GDP growth to ease and, with it, the demand for commodities,” says the report.
Commodities at the crossroads – World Bank
FTW2106SD
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16 Mining & Minerals January 2011
Ensuring that capacity keeps pace with demand is part and parcel of every shipping line’s strategy – and the growing containerised commodity export market has seen the introduction by Safmarine of a number of additional containerised shipping services between South Africa and the Far East, says national commodity manager, Steven Simpson
“Safmarine has met the demand for
increased capacity in two ways,” says Simpson, “firstly by introducing a number of new services in 2010 and secondly by improving capacity on existing services.”
The line’s FEW2 service operates weekly from Walvis Bay direct to Tanjung Pelepas, serving the mineral export market from Namibia and Zambia.
Safmarine is also the main loader on the FEW3 service, which offers a fortnightly
service out of Richards Bay direct to the East.
“We’ve also provided increased capacity on the Safari 1 service, our largest service to the Far East, while the Safari 3 service, which calls Maputo on a weekly basis, and the ASAS service, which calls PE and Durban on its way to the Far East from South America, are additional options for shipping cargo to the East.”
By Ed Richardson
While the African National Congress is potentially spooking mining investors in South Africa with continuing talk of
nationalisation, other countries on the continent are busy unravelling legislation and regulations.
Steps include reducing or doing away with statutory government ownership quotas, lowering taxes and passing new mining legislation.
Exploration and the opening up of mines is good news for the freight industry, which benefits from the start of the process through the importation and transport of drilling equipment, laboratories and staff accommodation, through to the production phase when product is exported and spares for the mines imported.
Countries that have reduced tax include Namibia, which has lowered corporate tax for mining companies, and Zambia, which has scrapped its 25% windfall taxes on mining.
Announcing the move in 2009, finance and national planning minister Situmbeko Musokotwane said the government had also allowed hedging income to be a part of the mining income for tax purposes and increased capital allowance to 100% as an investment incentive. Botswana – often cited by the African National Congress Youth League as an example of nationalisation – has in fact reduced government ownership requirements.
According to the Botswana Export Development and Investment Agency, moves to attract investment have seen “the abolition of the government’s right to a 15% free equity participation in all new mining projects, replaced by an option to acquire up to a 15% shareholding on mutually agreed commercial terms”.
Mozambique adopted a new mining code in 2002, and revised the regulations in 2006 to allow both foreigners and nationals to engage in prospecting activities and obtain mining
concessions. With the exception of salt mining, mining and quarrying activities are subject to a low tariff of 2.5%. The country is now on the brink of a mining boom, which will see the development of ports, road and rail infrastructure.
Farther afield, Eritrea has published new legal guidelines on the mining and minerals sectors which make concessions to foreign investors, while retaining the right of state ownership over resources.
Eritrea’s mining law gives the government a minimum of 10% free stake in any mine, without having to fund exploration costs. It also holds an option to add another 20% at market prices for a maximum 30% stake (the ANC Youth League wants a minimum 60%), but the government must contribute to exploration costs.
Eritrean incentives include a low income tax rate of 38%, low royalties of 2-5%, nominal (0.5%) duties on capital goods, and the right to dispose of minerals locally.
This has drawn big-name gold miners such as AngloGold Ashanti and Newmont Mining, both of which are exploring for gold in Eritrea and Egypt on a promising geological belt known as the Arabian-Nubian Shield.
The shield encircles the Red Sea and runs
along the coastal sides of countries bordering it: Egypt, Sudan, Eritrea, Ethiopia, Saudi Arabia, Yemen, Jordan and Israel.
There is hope that the gold will boost the economies of Eritrea and Egypt, as it has done in West Africa, where countries such as Mali and Burkina Faso have become popular investment destinations for miners. The region’s gold output doubled in the 10 years to 2008, and there are regular discoveries of deposits of one million troy ounces, according to UK investment bank Ambrian Capital.
In 2003, Mali revised its mining code in order to attract more investors, while Burkina Faso started revising its regulations in 1997.
In contrast, Bloomberg reported in August that Anglo American and Lonmin, who employ 100 000 people in South Africa, say the government has deprived them of mine rights, threatening investment and job creation in the country’s biggest export industry.
For the freight industry, this means rediscovering the African “hinterland” and ensuring that it has the people, systems and infrastructure needed to replicate South Africa’s mining successes throughout the rest of the continent.
African states moving away from nationalisation
New services cater for growing commodity exports
Mining in Mozambique ... The country is now on the brink of a mining boom.
www.ftwonline.co.za
FTW2104SD
18 Mining & Minerals January 2011
By Ed Richardson
Many of the world’s top investment analysts and mining gurus
believe that the commodity “supercycle” of high demand has recovered from its wobble during the global recession.
For the freight and logistics industries in Africa, this is good news, as much of the continent’s economy is driven by the export of commodities.
However, the Chamber of Mines in South Africa believes that internal demand will also help support commodity demand.
Chief economist Roger Baxter told an IHS Global Insight economic outlook conference that, despite the recession, the biggest infrastructure boom in history was still under way – with half of the construction happening in emerging markets.
The Chamber estimates that emerging market spend on infrastructure is set to hit $20-trillion over the next decade, with China accounting for 40% of that.
That view is echoed by
Evangelos Mytilineos, chief executive of southeast Europe’s biggest aluminium smelter, Aluminium of Greece. He told investors that growth in China and other emerging economies might lead to commodity shortages in the coming years.
While there are warning flags around the sustainability of China’s infrastructure investment, there is a market much closer to home.
Africa is urbanising fast, and new homes, flats, offices and factories all require steel, copper, cement and other
commodities, says Baxter.Xstrata’s chief executive
officer Mick Davis is also optimistic about growing demand.
Speaking at the Wits Business School in mid-2010, he said copper prices had reached pre-economic meltdown levels, platinum was surging higher, and iron ore prices were also rising.
Xstrata expects urbanisation in developing nations such as China, India and Brazil to continue to drive commodity prices.
Also bullish about commodity demand is Rio Tinto’s chief economist Vivek Tulpule, who has predicted that overall demand for metals will double over the next two decades.
There are risks, however.Xstrata has identified
the three biggest as being collapse of commodity demand in China and India; China and India securing their own sources of commodities; and governments creating uncertainty through changes in legislation.
For the freight industry in Africa, the massive investment by China in
mines is possibly the biggest threat.
Over the past year FTW has seen first-hand how Chinese operators tend to favour Chinese companies and staff for as much of their operation as possible.
While they may make use of local service providers such as customs clearing agents, freight forwarders and transport operators when they first start operating in a country or along a corridor, Chinese companies are brought in as soon as there are sufficient volumes.
Chrome has emerged as South Africa’s top metal export commodity to the East and is likely to remain there thanks to high demand from China.
That’s according to Safmarine’s national commodity manager Steven Simpson who says exports of South African chrome have been very strong during 2010 with no sign of a slowdown in 2011.
“This market is however very volatile and the business highly dependent on the demand and buying patterns of the East.”
Safmarine has also seen increasing interest from the Chinese in Zimbabwean chrome and the line has worked with key South African exporters to take advantage of these opportunities, he said.
There’s been particular focus on
overcoming the logistical challenges associated with the exports of Zimbabwe’s high quality chrome.
“In general Zimbabwe’s commodity market is making a huge comeback,” said Simpson. “In addition to metal and minerals, the country’s exports of cotton and tobacco are doing well and if all goes well, the Zimbabwean commodity market could soon be back to its full potential.”
Zimbabwe commodities making a big comebackChrome the top player in SA’s metal exports
Optimism over sustained commodity demand“Supercycle” will keep Africa on track
www.ftwonline.co.za
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20 Mining & Minerals January 2011
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By Liesl Venter
South African coal producers will struggle to meet demand over the next few years despite coal production that is likely to be on an
upward trend from 2011.With South Africa’s coal production having
been stagnant at approximately 240 million tonnes per annum for the greater part of the past decade, expectations are that coal production will increase marginally in the coming months, says Frost & Sullivan metals and mining analyst Wonder Nyanjowa. This is because there are no major projects at present transitioning the country to full production.
“The electricity crisis in South Africa highlighted the need to not only expand power generation capacity, but also to ensure adequate supplies of coal to power generating plants. Coal production must grow to cope with the anticipated increase in demand for coal from the power generation and synthetic fuels manufacturing industries.”
Analysis from Frost & Sullivan, published in September 2010, indicated that South Africa’s coal production was likely to increase to 300 million tonnes by 2015, as coal mining companies expanded to meet the anticipated increase in demand for coal from companies such as Eskom and Sasol.
“The construction of two new power stations by Eskom, the de-mothballing of three others, and the construction of an extra synthetic fuel manufacturing plant will result in the domestic demand for coal stepping up by an additional 75 million tonnes in the next five to ten years,” says Nyanjowa.
But South Africa’s coal mining industry remains unbalanced, with rising coal demand on one hand and constrained supply sources on the other.
Limited port and rail facilities continue to slow the growth of the country’s coal exports. With the global demand for coal expected to increase by 4% per annum, the lack of infrastructure may prevent the country from coping with the upsurge in demand.
There is a definite need for private sector participation in expanding infrastructure as SA’s exports of coal and iron ore continue to rise, according to Transnet director for planning (ports) David Stromberg.
This confirmed the resurrection of public/private partnerships (PPPs) revealed to FTW by Chris Matchett, another Transnet ports planning executive.
A study, due to be finished towards the end of this year, will define plans to expand the Richards Bay rail corridor for coal exports beyond 81-million tonnes, Stromberg added, and to further extend Transnet’s current expansion of the capacity on its iron ore line to Saldanha Bay to 60-mt from the current 44.7-mt.
He said the company would increase capacity for iron ore exports at Saldanha port to 80-mt a year and was also studying ways to build a 12-mt per year manganese terminal.
‘SA coal producers will struggle to meet demand’
Growing call for private sector participation
www.ftwonline.co.za
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