Grindrod, Northwest Rail Company team up on Zambian rail prospect

14th February 2014

By: Irma Venter

Creamer Media Senior Deputy Editor

  

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Freight and logistics service provider Grindrod has secured the opportunity to work with Northwest Rail Company (NWR) to build, operate and maintain a new 590 km Cape gauge railway from Chingola, in the heart of the old Zambian Copperbelt, to the Angolan border.

The exclusive rights to do this were granted to NWR, a Zambian company, by the Zambia government in July 2006.

The agreement signed in February will enable the parties to conclude a bankable feasibility study, which is already under way, for the project.

The railway is to be built in two phases, with Phase 1 extending from Chingola to the Kansanshi, Lumwana and Kalumbila mines (290 km of track), and Phase 2 to connect with the Benguela line on the Zambia-Angola border, near Jimbe.

Phase 1 is intended to service existing ore and finished copper traffic, with Phase 2 intended to open up a direct corridor to Lobito, which will allow landlocked Zambia to import oil directly from Angola, and to stimulate further mining activity in the Western Copperbelt region.

The estimated capital cost of Phase 1 is $489-million, while Phase 2 of the NWR project is estimated to cost $500-million.

KPMG’s Infrastructure and Major Projects team has developed the project with NWR over the last 12 months and also facilitated the closure of the deal.

Subject to the conclusion of the Phase 1 bankability feasibility study, construction is expected to start during 2014.

“I have been developing this project for a number of years. The synergies with Grindrod’s rail businesses make Grindrod an ideal partner in the joint venture. It means we will be able to bring this project to [fruition] in the shortest possible time,” says NWR founder and owner Enoch Kavindele, who is also a former Zambia Vice-President.

Grindrod’s Rail division operates railways, builds, refurbishes and maintains locomotives and wagons, provides rail signalling systems, and constructs and maintains track infrastructure.

“We have spent the last few years developing our rail capabilities and growing our capacity to participate in the growth in the Africa rail sector,” says Grindrod Rail divisional CE James Holley.

“We are perfectly placed to take up opportunities like this on the African continent.”

“This investment will enable Grindrod to extract synergies from our existing investments in the North–South rail corridor, and our port operations in Maputo, Richards Bay and Durban,” adds Grindrod Freight Services Ports & Rail CEO Dave Rennie.

“We also see great potential in creating an Atlantic gateway to Central Africa, through Lobito, and look forward to playing our part in making this a reality with the development of Phase 2.”

The Copperbelt straddles the border of Northern Zambia and the Southern Democratic Republic of the Congo (DRC).

Current production of copper in this area accounts for around 8% of the world’s production, and BMI International forecasts sustained growth in the Zambian copper industry at 5% a year over the next decade.

“We like the economic fundamentals of the copper market,” notes Rennie.

“We were previously highly focused on the coal and iron-ore markets, so this gives us a good opportunity to diversify our bulk commodity mix.”

Existing copper mines are located the Eastern Copperbelt, and are serviced by smelters located near to Chingola (Zambia) and Lubumbashi (DRC).

New mine developments have started, and more are planned, in the Central and Western Copperbelt area of Zambia, but will require ore to be transported up to 300 km for processing.

Road infrastructure is poor and the cost of road transport is becoming prohibitive. An alternative rail transport solution will be more economic for the North Western province of Zambia, and much less damaging to the local environment, says Grindrod in a statement.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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