Mining firms fret over transport curbs, rising costs in Oman

DAMPENING FACTORS: Move to permit only 40-tonne trucks for mineral transportation to Salalah Port –

Conrad Prabhu –
New restrictions on the loading of trucks carrying mineral commodities from quarries in Dhofar Governorate to Salalah Port, among a general uptick in levies and logistics costs, are threatening to hurt the bottom-lines of mineral producers and exporters operating in the south of the country.
Some of these concerned were highlighted on the second day of the Mining Investment Middle East & Central Asia conference organised by Spire Events yesterday.
On average, around 10 million tonnes of mineral commodities — chiefly gypsum and limestone — are ferried by thousands of heavy trucks from quarries in and around Thamrait to Salalah Port every year. These numbers are projected to spike once new limits on the weight of trucks come into effect, a top industry executive has warned.
Dean Cunningham, CEO of Kunooz Oman Holding — one of the largest mining sector firms in the Sultanate, said the new guidelines announced by the Royal Oman Police reduce the volumes that may be trucked by road from 50 tonnes presently to 40 tonnes going forward. This would likely result in the registration of only 16-metre tippers in the future, as opposed to the 18-metre tippers that can presently be operated, he said.
“There is no clarity on when that rule will come into play, but it will have a distinct impact on our cost structure. The logistics nightmare just got worse,” he remarked at the Sheraton Oman Hotel yesterday.
Trucks make around 220,000 trips to move an estimated 10 million tonnes of mineral commodities from quarries to Salalah Port annually, according to the executive. This corresponds to 705 trucks plying on the main route to the port daily, while consuming around 23 million litres of diesel annually. With the reduction in truck sizes from 50 to 40 tonnes, the number of trips required to ferry the same quantity of minerals will rise significantly, while also adding 22 per cent to the logistics costs of mining firms when the new curbs come into force, he warned.
In his address, Cunningham also bemoaned the spike in levies and costs incurred by mining firms over the past year. The royalty rate, set at 75 baisas per tonne in 2016, has since been increased to 235 baisas per tonne earlier this year, leaving mining firms to shoulder “probably one of highest royalty rates around”, he said.
This came on top of an sharp increase in diesel costs following the removal of government subsidy on motor fuels with effect from last January. Diesel prices have since jumped nearly 50 per cent to 211 baisas per litre, up from 139 baisas per litre before the subsidy rollback.
Adding to the cost burden was an RO 1.33 entry charge per truck introduced by Salalah Port last year, as well as an increase in the corporate income tax to 15 per cent, up from 12 per cent previously, he said.
All of these factors are “inhibiting” Oman from becoming a world-class supplier of bulk minerals, said Cunningham. “As an alternative to oil and gas, the bulk mining sector has no chance of survival at this point without significant improvements in selling prices and some incentivisations,” he stressed.
The official mooted in this regard the establishment of a centralised buying and marketing agency for bulk commodities to help combat “price undercutting” by small traders despite a minimum export price of $12.5 per tonne set by the Public Authority for Mining (PAM). Exports of Omani gypsum and limestone should be channeled through this proposed agency, he added.