Doubts Remain Over Important Coal Infrastructure Reopening

BRISBANE, Australia - April 28, 2013 - PRLog -- The Matola Corridor, a coal transport rail passage that links South Africa's Limpopo province to Mozambique's Beira and Maputo ports, was set to be officially reopened by April 19, according to Transnet, the state-owned transport and logistics company.

However, the normal resumption of freight down the line may take longer to achieve as Transnet continues to repair the line throughout May. There's also the likelihood for a new survey of the low-bridge that collapsed, according to UK stockbroker SP Angel.

"Pictures indicate that a low bridge collapsed, perhaps as part of the derailment," SP Angel said in a note to clients. "The tangled wreckage and state of the bridge supports suggest that a new survey of the line may be required considering rising levels of freight."

Transnet said track repairs would continue "for several months whilst the line is operational" while the low-bridge would only be opened following an accreditation process by Mozambique's rail operator, CFM.

Around February 10, some 10 wagons from a freight train were derailed on the line which runs from Witbank in South Africa's Mpumalanga province to Maputo in Mozambique. The development was another setback for Johannesburg-listed Coal of Africa (CoAL) which exports through the route.

"Thankfully, South African engineers had a replacement bridge structure ready for assembly to replace the collapsed bridge and the whole structure and rail replacement should be ready to reopen within two weeks," SP Angel said.

CoAL, which had declared a force majeure on exports from its Mooiplaats and Woestalleen operations in Mpumalanga province and its Vele coking coal mine in Limpopo province, said exports would resume in May.

"The force majeure will remain in effect until the rail system has reached its normal operating capacity," CoAL said in a statement.

CoAL's response to the hindrance was to channel 100% production from Mooiplaats into the domestic market, a sensible move in the opinion of analysts considering the premium being paid by domestic consumers over exports, the prices of which continued to languish.

Production from Woestallen, an operation that is on the brink of closure as its supply from CoAL's Vuna colliery is almost exhausted, was being stockpiled. There was also a stockpiling of production at Vele.

The interruption to production at all of CoAL's operations does not bode well for a company that posted an interim loss of US$117M on a mere $83.7M in revenue in the six months to December.

But SP Angel was reasonably optimistic about CoAL's prospects.

"Thankfully, the company is backed by Beijing Haohua Energy (BHE), a Chinese mining group with 10Mtpa to 12Mtpa of anthracite production," it said. CoAL sold just under a quarter of its equity to the Chinese company last year in an effort to refund the balance sheet and position itself for project financing.

"Careful and expert management control and initiatives are being implemented to restore profitability," SP Angel said.

"It is a challenge to turn the operations around in depressed coal markets, but there is potential for improvement. We will continue to follow the story closely."

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