Investment outlook: what investors are looking for Speaker: John Meyer, Partner Mining Analysis, SP Angel Mining On Top: Africa - London Summit 25-26 Jun 2013 | London

1. Railway infrastructure in Africa:
Time to lay new tracks after a long break?
John Meyer – Mining Analyst / Partner
SP Angel
June 2013

2. 2
World rail
Ownership We are owned by the staff that work in the business
Heritage
The SP Angel research team
John Meyer – Partner, Head of Resources
John Meyer has been top ranked as an analyst by Extel for all UK smaller companies in 2006 and in UK smaller mining
companies in 2008, 2007, 2006, 2005. John has been successful in recognising future trends in commodities and translating this
to key stock picks. He has built mining research teams at Fairfax, Numis and before that at SG Securities. Previously John
worked with the European Strategy group at Goldman Sachs and within mining project finance at Montagu Mining Finance.
Carole Ferguson – Senior Research Analyst
Formerly a fund manager at Societe Generale Asset Management for 10 years where she was Director – UK Equities. Her
previous roles include Director at Robert Fleming in the Equity Derivatives Group, Vice President of JP Morgan in Equity and
Equity Related Group. Prior to joining JP Morgan Carole worked at SBC as part of the convertibles team.
Sergey Raevskiy – Research Analyst
Sergey worked in Metals and Mining Research at Fairfax I.S. PLC. He holds MSc in Banking and Finance form the Cass
Business School. Formerly Sergey completed BSc in Economics from the Higher School of Economics, Moscow, Russia.

3. 3
World rail
Ownership We are owned by the staff that work in the business
Heritage
• 1.37 million miles of rail world wide bring affordable travel and prosperity
People like railways

4. 4
Railway system in Africa services export oriented mining industry
Ownership We are owned by the staff that work in the business
Heritage
• Africa landmass 30million sq km.
66,011km of Rail concentrated in the
coastal areas established in the colonial
era to transport raw materials and
labour to ports.
• In contrast, India is 3million sq km.
Indian railway may be described as a
“network” which allows transportation
between states supporting labour
migration and intra-region trade.
63,974km of rail

5. 5
Ambitious African rail development plans
Ownership We are owned by the staff that work in the business
Heritage
• Cecil Rhodes would be proud of the network of lines planned
• But will funding come available and will rail transcend boarders without much interruption?
German Schiller Insitute (2011)

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Compare Africa with developed nations
Ownership We are owned by the staff that work in the business
Heritage
• USA = 228,513Km of rail
• Russian Federation = 85,292km
• China = 66,239km
• India = 63,974km
• Canada = 58,345km
• Germany = 33,708km
• Japan = 20,035km
• Africa 66,011km
• South Africa = 22,051km
• Egypt = 5,200km
• Sudan = 4,510km
• DRC = 3,640km
• Nigeria 3,530km
• Algeria 3,510km
• Mozambique 3,120km
• Tanzania 2,600km
• Namibia 2,380km

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East Africa rail projects
• US$5.2bn project (start in 2014) – upgrading of the current rail line from Dar es Salaam to Isaka
(Tanzania) and additional link to Kigali (Rwanda) and Bujumbura (Burundi).
• US$1.9bn rail line to link Tanga port and Arusha (Tanzania) with Kampala (Uganda) via Musoma
port at the Lake Victoria (to be completed in 2015).
• In addition, a new rail line to be laid connecting Uganda’s rail network at Gulu with Southern
Sudan’s capital Juba (250km) and stretching further 550km NW to the Wao railhead (Southern
Sudan).
• US$1.1bn project to connect Chingola (Zambia) and Benguela line (Angola) through a 554km
railway line.
• US$3bn to be spent on a 525km line from Tete province in Mozambique to the coastal Macuse
(north of Beira) and a new port to handle 25mtpa.
• US$4.4bn is being spent by Vale to upgrade the Nacala port and build a 912km railway link from
Tete to Nacal (Mozambique) with a bit running through Malawi (start in H2 2014).
• 5,000km of railway lines are planned to be built by 2020 in Ethiopia and neighbouring nations.
In particular, the nation has recently signed a US$3.2bn deal with Chinese and Turkish firms to
construct a rail link to Djibouti’s third port of Tadjourah, currently under construction.

8. 8
Rail is generally safe and trusted till trains go missing
Rail can be a target but generally brings people together
Zimbabwe
• Zambian copper producers used to export majority of copper by rail through Zimbabwe till a
train went missing along with thousands of tonnes of copper.
• Now copper miners send trucks individually by road.
• Russia suffered similar thefts during the fall of communism.
• Iron ore and coal are better commodities to rail. Not so easy to steal, harder to sell and easier
to track
• Mozambique – Renamo, a former guerrilla group recently threaten to paralyse Sena rail line
They don’t seem to be getting the hang of the idea of political change without threats

9. 9
South Africa rail projects
• Transnet plans to spend R205bn to grow rail capacity from current 200mtpa to c. 350mtpa in
the 2013-2019 period.
• US$18bn 600km VHS (Very High Speed) rail link to connect Johannesburg and Durban. Should
partners commence development the rail should be operational by 2025.

10. 10
West Africa rail projects
• US$4bn might be spent to build railway infrastructure between Burkina Faso, Niger, Benin and
Cote d’Ivoire to promote intra-African trade.
• Potentially 700km rail link between Simandou iron ore project (Guinea) and a new deepwater
port to be constructed near Conakry.
• Refurbishment of the existing 465km railway connecting Mbinda and costal Pointe Noire in the
Republic of Congo (Equatorial Resources project).
• 500km railway project to run from the Mbarga and Nabeba deposits owned by Sundance in the
south east of Cameroon to the coast, either Lalobe or Kribi.
• 240km link from the Belinga iron ore project in the east of Gabon to the Trans-Gabon railway at
Booue.

11. 11
Africa is long way behind other resource rich developing nations regarding
the level of national logistics
South Africa scores 3.7 in the logistics performance index (LPI) and is ranked #1 on the continent
and #23 in the world (out of 155). Egypt is no.2 in Africa, ranked #57 in the world.
World Bank (2012)

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Benefits / disadvantages of rail
Benefits
Fuel Efficiency: highly energy efficient per tonne moved, a critical element for nations which import fuel
Security: good security record through most countries
Reliability:
Manpower: good jobs for good people
Land-use efficiency: Less of an issue in Africa but is efficient in terms of tonnes moved
Speed: usually consistent speed and reliable times
Safety: good safety record particularly for heavy loads through urban areas
Technology: rail can be high tech or low tech
Disadvantages
Inflexibility: still needs roads to get to rail terminals
Cost: High start-up capex, needs guaranteed traffic to justify cost
Organisation: rail lines do need a degree of organisation and financial discipline – Africa does not need Dr
Beeching to carve up its rail lines and reduce rail benefits

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