Rail constraints stymie iron ore company's expansion

South Africa-based African Rainbow Minerals (ARM) would be capable of producing 20 million tpy of iron ore if it could get sufficient rail allocation from rail operator Transnet, according to CEO Mike Schmidt. The company is ramping up production at its Khumani mine more than one year ahead of schedule, Schmidt said during a presentation at the Mining Indaba in Cape Town last week. In 2012 the mine produced 14.8 million tonnes, while ARM is targeting production of 16 million tonnes this year. ARM also has the Beeshoek mine, and ARM can easily and sustainably produce 20 million tpy from the combined output of the two mines, Schmidt said. “We want to increase our export sales to 20 million tpy, but Transnet needs to clear its mind on whether it wants to increase the rail capacity to 78 million tpy or 82 million tpy because that would influence the allocation we can get,” he told FTW on the sidelines of the Indaba. “The allocation will determine our growth,” he added. Transnet is in the process of deciding to what level it is to increase the iron ore rail corridor capacity, which is at the moment 60 million tpy. Industry expects Transnet to make a definitive announcement on this soon. The capacity expansion on the rail is part of a R200- billion ($22.5million) countrywide port and rail upgrade and expansion plan undertaken by Transnet. Schmidt noted that from the company’s diversified portfolio, which includes iron ore, platinum group metals, copper, chrome, ferro-alloys, coal and nickel, iron ore and manganese dominate the group’s revenue. “They will continue to do so for some time, but we see improvement from the nickel, platinum and coal output this year, and within the next six to eight months we will start generating revenue from copper,” he said. The company’s copper project in Zambia, Konkola North, was commissioned in September last year, three months ahead of schedule. ARM exports most of its products through the South African ports, and for growth in its portfolios remains reliant on Transnet’s expansion drive. INSERT ‘Transnet is in the process of deciding to what level it is to increase the iron ore rail corridor capacity.’