State-owned Transnet has signed a rail allocation deal with privately held United Manganese of Kalahari (UMK), which is investing R280m in growing its operations.

Transnet moved 14.5-million tons of manganese to six key SA harbours during 2018 and plans to rail 15.1-million tons in 2019, eroding the 2.5-million tons moved by road.

UMK, a major manganese producer but arguably one of the more opaque producers of the steel-making ingredient, is the ninth company Transnet has signed up to its manganese export channel allocation scheme, which provides rail and port access to producers in the Northern Cape.

The 51% black-owned UMK was founded in 2005 and has reached more than 3-million tons of manganese output during 2018, said CEO Victor Radko.

The contract with Transnet would be for exports of 2-million to 3-million tons of ore a year, he said, declining to be more specific because of confidentiality clauses and manganese price sensitivity to this kind of information.

UMK has started a R280m expansion programme to buy new equipment and update its processing plant to lift output to 3.6-million tons in 2021, he said.

Asked about a listing on the JSE, Radko said the proposal had been put to shareholders by management and that a decision whether to list on the Johannesburg bourse would be made before the end of 2019.

For Transnet, however, the signatures put to the allocation deal that runs to 2023, means that nine of its 10 major customers have now signed up, said Mike Fanucchi, the utility’s chief customer officer.

Transnet railed 14.5-million tons of manganese in 2018, coming close to its long-term target of 16-million tons, and nearly triple the 5-million tons it moved in 2012, he said.

The cost to reach the 16-million tons target by 2024 was R29bn, but the 14.5-million tons was achieved with expenditure of about 15% of that as the utility used its entire rail network more smartly, he said.

Transnet operated a take-or-pay contract system, meaning producers had to be realistic in their output forecasts because failing to fill wagons or trains allocated to their mines resulted in penalties.

Transnet was reassessing the manganese export channel through the new port of Coega, which had originally been set for 12-million tons of manganese a year. However, that number was likely to be lower as companies preferred the options presented by six available ports, Fanucchi said.