Mining giant BHP Billiton has signed a ten-year contract with South Africa-based logistics company Transnet for transporting coal on rail.
Under the ZAR24bn ($2.1bn) deal signed with BHP Billiton Energy Coal South Africa (Becsa), Transnet would transport around 18 million tonnes of coal a year from Becsa's mines in the eastern Mpumalanga province to the privately-owned Richards Bay Coal Terminal (RBCT) in KwaZulu-Natal province.
The contract will expand Transnet's capacity by ten million tonnes from the current 73 million to 81 million tonnes in the next seven years.
Transnet said in a statement: "Take or pay contracts are crucial to Transnet's capital investment programme as they provide revenue certainty, a key consideration for raising funds in the capital markets.
Under the take or pay contract, Transnet agrees to provide trains and BHP is obliged to pay whether it uses its services or not.
Following the deal with BHP, Transnet expects to secure 28 agreements with other coal firms including Baar, Glencore and Exxaro Resources by the end of November.
All the exporters will sign individual contracts with Transnet for a duration of ten years, starting retrospectively from 1 April this year and ending on 31 March 2024.
Meanwhile, the mining companies have reportedly agreed to allocate 5% of the contracted tonnage to emerging mining firms.
According to the World Coal Association, South Africa is the largest coal producer in the continent and the sixth largest coal exporter globally, with BHP being the largest exporter in the country, reported Bloomberg.
The coal exported from South Africa goes through Richards Bay Coal Terminal (RBCT) to the Asian and European markets.
Image: The Richards Bay Coal Terminal in the KwaZulu-Natal province of South Africa. Photo: courtesy of Col André Kritzinger.