On a visit to Sishen on 22nd May 2018, Kumba Iron Ore CEO Themba Mkhwanazi announced to the media a two-pronged strategy aimed at extending the 13-year remaining life of mine at their operations there.
The first part of the strategy is investing in technology to catch up with the technological advances that have long since been adopted by competitor iron-ore mines in Australia and elsewhere. Kumba has already spent R749 million on technology upgrades over the past three years as it has reconfigured the pit for more efficient operations. Examples include technology to assist operators, implementing autonomous operations that remove people such as drill operators from harm’s way, and investments in “smart” mining methods.
The second part of the strategy is a feasibility study being conducted into the installation of a large-scale ultra-high dense media separator (UHDMS). This would allow for the treatment of 260 million tonnes of stockpiled material over an extended period producing up to an extra 2 million tonnes per annum of high-grade iron ore.
Mkhwanazi also announced that Kumba was exploring the area between Sishen and Kholomela and that prospectivity looked promising. Any new discovery of additional reserves in this area would extend the life of mine of the provinces main mining complex. This may be critical for the sustainability of economic livelihoods in the area.
But there is one notable risk area: making sure that it will remain possible to transport mined ore to the coast at Saldhana along the Sishen-Saldhana ore export railway line. While Kumba says that an increase in productivity on the line could unlock 10-20% more export capacity, the company has had to declare a force majeure as a result of recent derailments on the line.
The iron-ore export railway line is owned by Transnet and operated by Transnet Freight Rail (TFR) and is one of the Transnet groups biggest cash-cows. Two recent derailments and four other derailments over the past six months have forced Kumba to declare force majeure because these incidents have meant that the company could not honour its sales commitments to its clients. A force majeure is usually declared when something out of the control of the company, in this case Kumba, prevents it from complying with the provisions of a contract. The Solomon Star has learned from verified sources that significant underspending on preventative maintenance by TFR over an extended period has given rise to the recent derailments. Apparently, the cash-strapped parastatal is also struggling to proactively finance ongoing maintenance and has been reduced to dealing with reactively to emergencies such as derailments as and when they happen.
But what does this portend? At its simplest level, that the capacity of the line will fall substantially as lower speed limits intended to reduce the risk of derailment force a reduction in traffic on the line and therefore reduced mineral exports. In turn, this will lead to reduced export revenues and lower foreign exchange earnings. More worryingly, dependent as the area is on the Kalahari/Kgalagadi mineral complex, reduced operations, dishonoured sales contracts, and job losses, would all be unwelcomed results, all at a time when iron-ore prices are recovering raising prospect of new investment! As Kumba CEO Themba Mkhwanazi says the derailments are “… unprecedented and raise all kinds of concerns. We are eager to get to the bottom of the causes because it impacts our operations”. Likewise, the citizenry of the Northern Cape should be equally concerned that the wheels are falling off – the railway line! Watch this space for further news in coming weeks on this vitally important matter.