Grindrod stock soars on Zambian rail deal

Published Feb 4, 2014


Roy Cokayne

Shares in Grindrod leapt 6.13 percent to close at R26.85 yesterday after the listed integrated logistics service supplier reported it was to partner the Northwest Rail Company (NWR) in building, operating and maintaining a new railway line costing almost $1 billion (R11bn) in Zambia.

The 590km Cape gauge railway will be built in two phases from Chingola in the heart of the old Zambian copper belt to the Angolan border.

The opportunity for Grindrod’s wholly-owned subsidiary, Grindrod Mauritius, to work with Zambian company NWR on the project follows exclusive rights being granted to NWR by the Zambian government in July 2006.

Grindrod said the deal, signed yesterday between Grindrod Mauritius and NWR, would let the parties conclude the bankable feasibility study, which was now under way.

Enoch Kavindele, a former vice-president of Zambia and founder and owner of NWR, said he had been developing this project for a number of years and the synergies with Grindrod’s rail businesses made Grindrod an ideal partner in the joint venture and meant they would be able to bring this project into being in the shortest possible time.

Kavindele said the project would create thousands of jobs in the country, in line with government policy.

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

James Holley, the divisional chief executive of Grindrod Rail, said the division had spent the past few years developing its rail capabilities and growing its capacity to participate in the growth in Africa’s rail sector, which meant it was “perfectly placed to take up opportunities like this on the African continent”.

Dave Rennie, the chief executive of the Grindrod Freight Services division, said the investment in the new railway line would enable Grindrod to extract synergies from its existing investments in the north-south rail corridor and its port operations in Maputo, Richards Bay and Durban.

“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 two,” he said.

The 290km first phase of the project extends from Chingola to the Kansanshi, Lumwana and Kalumbila mines and involves an estimated capital cost of $489 million.

The $500m second phase will connect this line with the Benguela line on the Zambia-Angola border near Jimbe.

Phase one is intended to service existing ore and finished copper traffic, while phase two is intended to open up a direct corridor to Lobito, which would allow landlocked Zambia to import oil directly from Angola and to stimulate further mining activity in the western copper belt region.

KPMG’s infrastructure and major projects team have developed the project with NWR over the past 12 months and facilitated the closure of the deal.

Construction is expected to start this year subject to the conclusion of the phase one bankable feasibility study.

Rennie said the copper belt straddled the border of northern Zambia and southern Democratic Republic of Congo and was one of the richest and most underdeveloped geological regions in Africa.

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