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Grindrod moves to expand Richards Bay coal, magnetite terminal

13th March 2015

By: Irma Venter

Creamer Media Senior Deputy Editor

  

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Freight services and shipping group Grindrod will upgrade capacity at its Richards Bay coal and magnetite terminal from 3.2-million tons a year to 4.5-million tons a year, says Grindrod CEO Alan Olivier.

He says the R125-million project may be completed by the end of the year. Grindrod has a 49.9% share in the project.

Olivier says Grindrod has been looking “for some time” to grow the terminal. A joint venture (JV) agreement with the owners of the land adjoining the terminal, may now, finally, see the facility grow, with a second-phase expansion to eight-million tons a year also a possibility, as well as further growth to 20-million tons a year.

These further expansions will, however, require “much more material investment”, warns Olivier, as well as secured coal volumes.

He notes that rail freight parastatal Transnet supports the construction of the expanded terminal.

A second capital expenditure (capex) programme on Grindrod’s horizon is the Ngqura liquid-bulk-terminal storage project.

Grindrod has a 30.5% shareholding in the R2.9-billion project to build the 230 000 m3 storage facility, says Olivier.

Land is available to expand the facility to 720 000 m3, if required.

The facility will be used for the storage of all petroleum products, with the exception of crude oil and liquefied natural gas.

Should construction start this year, the first phase may be completed by 2018, says Olivier.

The project has been experiencing delays owing to the fact that the tariff model of the National Energy Regulator of South Africa (Nersa) “does not work” for projects requiring new capital outlay, says Olivier.

He says there are new tariff regulations in the works for May this year, which should allow for the construction of this facility.

Another project in the pipeline for Grindrod is the Oiltanking Grindrod Calulo Holdings (OTGC) JV with the Royal Bafokeng Group’s Mining, Oil and Gas Services business, to establish the OTGC Saldanha crude oil terminal.

The R3.1-billion project should be completed by mid-2018.

Grindrod has a 15.25% share.

The project will consist of twelve 1.1-million-barrel crude oil tanks, as well as the development of crude oil blending capability.

This project will also benefit from the same tariff regime change required from Nersa for the Ngqura project.

Dredging Maputo Port
Grindrod, a shareholder in the Maputo port, is also set to help finance a project estimated at $100-million to dredge the port to allow access for fully laden Panamax vessels with a draft of 14.2 m.

The project should be completed by the middle of next year.

The Mozambique government is assisting in waiving its concession fee for seven years to pay for its part of the dredging costs, says Olivier.

He says the aim of the project is to “make Maputo more competitive from a pricing point of view”.

He says the port is starting to reach its capacity, while price pressure in commodity markets also requires the port to become more efficient.

Olivier believes this is possible through loading and offloading ships faster, and by allowing bigger ships into the port.

Maputo port volumes were up 14% in 2014, compared with 2013, reaching 19.5-million tons.

Grindrod also has its eye on an estimated $500-million project to build a 340 km railway line from Chingola, in Zambia’s Copperbelt, to Kalumbila, with a possibility to eventually extend the line to the Angolan border.

This north–west corridor project could potentially move 1.2-million tons of copper concentrate a year.

Olivier says Grindrod will not supply all the project’s required capital, noting that the company is already talking to partners to fund and develop the line.

Grindrod has secured a draft development agreement on the project, and will soon sit down with the Zambian government to finalise a concession agreement, he adds.

Grindrod also has its eye on further developing the so-called north–south rail corridor, where it operates on a concession agreement, carrying around 800 000 t of goods a year.

The corridor runs from northern Zambia, through Zambia and Zimbabwe, to Maputo, Durban and Richards Bay.

This corridor can potentially carry around four-million tons of copper, mining supplies and agricultural products, says Olivier, especially when considering current road freight volumes.

Transnet and Grindrod are developing a corridor masterplan for the project.

It is the intention for the north–west corridor to link up with the north–south corridor at Chingola, notes Olivier.

He says the north–south corridor is “very efficient”, with trains taking six days to reach Durban from northern Zambia.

Grindrod also has an opportunity to secure more rail business in Mozambique.

The group has been asked to handle all the shunting work at the Maputo port on a six-month trial basis, while four derailments in southern Mozambique in 14 days – disrupting goods flow to the port – are potentially creating an opportunity for future rail con- cessions in South Africa’s northern neighbour.

Financial Numbers
Grindrod saw revenue for the year ended December 2014 grow by 2% to R32.7-billion, compared with 2013, with headline earnings up 4% to R729.4-million.

Freight Services contributed R494-million to headline earnings, and Shipping R175-million.

The Freight Services business was hit by decreased locomotive sales as a number of African mining projects had been delayed.

Olivier hints that a separate listing of Grindrod’s Shipping business might, at some stage, come into play.

 

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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