State-owned freight utility Transnet and manganese producer United Manganese of Kalahari (UMK) “renewed their business vows” last week by signing an R8.5-billion contract to move two-million tonnes to three-million tonnes of manganese each year by rail to six South African export channels.

Transnet commercial sales and marketing group executive Mike Fanucchi noted that the contract would be valid until 2023, as part of the utility’s manganese export capacity Allocation 2 (Meca 2) contracts.

After 2023, Transnet and its customers will initiate Meca 3 contracts.

Under Meca 2, Transnet has concluded nine transactions, including the agreement with UMK, while the finalisation of one transaction remains outstanding.

Under Meca 2, 15% of Transnet’s rail capacity is allocated to new entrants in the manganese export market to allow for industry growth and access to market; however, no new entrants have entered the market yet.

South Africa holds close to 75% of global manganese reserves and the country’s manganese exports have grown from five-million tonnes a year in 2015 to 15.1-million tonnes a year.

Fanucchi said Transnet planned to move 16-million tonnes of manganese ore a year by 2024. It would invest about R29-billion in rail infrastructure upgrades to achieve that capacity.

Fifteen per cent of that capital allocation has already been spent.

UMK, a 51% black-owned company, is the fourth-largest manganese producer in South Africa and owns operations in the John Taole Gaetsewe district municipality, in the Northern Cape.

UMK CEO Victor Radko noted that the company had produced two-million tonnes of manganese ore in 2017 and three-million tonnes in 2018. It planned to increase its production to 3.6-million tonnes over the next few years.

UMK’s board and shareholders have approved R280-million in plant upgrades and equipment purchases to enable it to increase its output.

The bulk of UMK’s production will be transported on Transnet’s rail network, with the balance to be moved by truck.

Radko pointed out that a decision by UMK’s board and shareholders to approve a possible listing on the JSE was still pending and would be made by the end of the year.