State-owned freight logistics group Transnet will invest nearly R1-billion to facilitate an incremental increase in coal export volumes from Limpopo’s Waterberg to 26-million tons between 2015 and 2019.

Transnet Freight Rail (TFR) CEO Siyabonga Gama indicated on Wednesday that the “interim” ramp-up phase would move ahead in parallel to a longer-term solution to increase volumes to between 40-million and 80-million tons from 2021 onwards.

This proposed heavy-haul project was still being studied and was unlikely to be included in the group’s 2015/16 business plan, which was currently being finalised by Transnet Capital Projects (TCP).

However, newly appointed TCP CEO Herbert Msagala indicated that the initial Waterberg project was expected to be included in the plan, which should be finalised in November.

The yearly business plans were informed by the larger R312-billion, seven-year Market Demand Strategy (MDS), which was currently in its third year of execution. Transnet invested a record R18.7-billion in the six months to September 30, 2014 on MDS projects and the group expected to spend a record R33-billion for the year as a whole.

Speaking at the group’s interim results, Gama said memorandums of understanding had been signed with a number of coal miners in the Waterberg and that it had already signed up commitments totalling 16-million tons, some of which would “come on stream by as early as June 2016”.

He indicated that TRF was “quite confident” that the miners were serious about moving ahead with projects and said that its discussions were not limited to Exxaro, which was planning to expand its Grootegeluk operation and develop the proposed new Thabametsi mine. In fact, Gama specifically mentioned Sasol and Anglo American, which he said also had coal prospects in the territory.

The group was also not overly concerned about prospects for future coal exports as a result of lower prices, which had declined from around $80/t last year to below $70/t currently. Its confidence stemmed primarily from an unfolding transition to take-or-pay contracts with some 30 coal exporters, which Transnet indicated would be concluded by the end of November.

The ten-year contracts committed TFR to providing trains as contracted, or face financial penalties, while miners were obliged to pay for the service as contracted whether or not they had product to transport.

Transnet signed its first long-term take-or-pay agreement with BHP Billiton Energy Coal South Africa (Becsa) in September. Under the arrangement, TFR would transport some 18-million tons of Becsa coal yearly along the coal export channel to the privately owned Richards Bay Coal Terminal (RBCT), in KwaZulu-Natal. The contract was said to be worth R24-billion deal.

Group commercial executive Khomotso Phihlela said the other deals should be concluded by the end-of-November deadline, with agreements having been reached in principle with all but one large miner.

Phihlela also revealed that the arrangement had facilitated the liberation of a further four-million tons of RBCT capacity for junior miners, which would raise the Quattro terminal’s overall capacity for smaller exporters to eight-million tons.

This additional capacity, Gama said, could be further enhanced by RBT Grindrod’s Navitrade terminal, which currently had a capacity of about 3.5-million tons. However, there were plans to expand the terminal incrementally to up to 20-million tons. For this reason, Transnet was no longer considering a competitor terminal at Richards Bay, but was rather focusing on projects to improve the rail interface between RBCT and Navitrade.

During the interim period, TFR railed 43.7-million tons of coal to Richards Bay and it expected to rail 74.2-million tons for the year as a whole.