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Next Steps in Creating Export Capacity

Coal Transportation Africa Summit

19 May 2015

divyesh.kalan@transnet.net

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Introduction

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Currency Risk • Rand / Dollar exchange rate

RAIL Performance • RBCT Channel • Eskom Power supply

Port Performance • RB1 grade constraint

for Junior Miners

Economics • Coal prices • Oil Prices • GDP growth • Cleaner coal • Coal availability • Eskom Coal Supply

2014/15 – Proving to be an extremely challenging year

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The Export Coal Performance is showing an upward trend

despite current market conditions

33 28 26 32 31 21 20 19 25 24 23 22

1,80

1,50

1,20

0,90

53 52 51 50 49 48 47 46 45 44 43 42 41 40 39 38 37 36 35 27 18 30 29 34 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 17

Actual tempo

Required tempo to meet budget

Average Budgeted Tempo

77,000

2015/16 budget

2014/15

76,000

2013/14

68,195

2012/13

69,209

2011/12

67,705

2010/11

62,626

+11%

Current Trend Analysis – Rail Volumes Million tons per week

Annual Trend Analysis – Rail Volumes Million tons per FY

Key Success Factors ▪ Increased security to reduce cable theft ▪ Increased reliability of rolling stock & network ▪ Better collaboration from pit to port ▪ Proactive deviation management and improved

response times ▪ Regular tracking of system balance and actual

position of locos and wagons to avoid bunching ▪ Maintaining high balance of the system in order to

create a buffer for potential disruptions ▪ High commitment of the cross-functional teams

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To achieve 77Mt by end March, we need to maintain weekly tempo of

1.68Mt until week 45 and 1.73Mt from week 46

High Variability

22

20

10

26

60

21 24 25 16 43

40

0

20

70

46 19

80

38 28 27 30 29 32 31 34 23 36 35 37

50

40 33 18

30

17

1.4

1.5

47

1.6

1.3

1.2

1.1

1.8

41 42 39 52 51 50 49 48 45

1.7

44

1.68Mt

1.73Mt

1.52Mt

Week

Cumulative capacity assuming bad weeks and occupations Mt per week (Average trains per day)

1.61Mt

Weekly volumes to-date Cumulative volume

Average to-date 1 Forecasted weekly volumes

Target step-up volume

Current week

Daily required # trains planned/day

Ermelo trains trains3

28.0 1.24

Natal trains and Panbult4

29.12 1.3 30.0 1.32

• Coal Availability • Stockpile capacity at

Port

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Existing Coal Railway System

Waterberg Feeder

Coal Backbone System

(North of Ermelo)

Coal Export Line (South of Ermelo)

Swazi Link System

Coalfields

Constraints

Springbok Flats Coal Fields

Lephalale

Musina

Lothair

Maputo

Komatiepoort

Ermelo

Ogies

Pyramid Broodsnyersplaas

Richards Bay

CFM

Waterberg < 30mtpa

Limpopo Coal Fields

Waterberg Coal Fields

Mpumalanga Coal Fields

200 wagon 26t/axle 25 kV AC

100 wagon 20t/axle Diesel

100 wagon 20t/axle Diesel

Thabazimbi

100 wagon 20t/axle 25 kV AC

100 wagon 20t/axle 3 kV DC

Turf

Tunnel

Horse shoe

50 wagon 20t/axle 3 kV DC

Limpopo Coal & Mineral Feeders

7 Transnet Projects

• Waterberg

• RichCor 81Mtpa

• Shongololo

• 2nd Overvaal Tunnel

• Swazi Link

• Navitrade RBTG

• Maputo/LCM

Increase Capacity

• Expansion and Sustaining Capital

• Efficiency Levers • TVCC – Transnet value

Chain Co ordination • Lean ; Six Sigma • Pit to Port

Waterberg Project Upgrade the existing rail infrastructure to accommodate initially an additional 2 x 100-wagon trains and eventually 6 x 200-wagon traversing from Lephalale to Ermelo to connect to with the coal line going to Richards Bay

Why the Waterberg Coalfields?

Waterberg Coalfields

• 40% of South Africa’s remaining coal reserves

• Strategic shift from Mpumalanga

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Waterberg Project Stages

Stage 2 Stage 3 Stage 4 Stage 5

Status FEL 3 – feasibility Engineering

FEL 3 – feasibility Engineering

FEL 3 – feasibility Engineering

FEL 3 – feasibility Engineering

Capacity 6.3 mtpa

12.6 mtpa

24 mtpa

24mtpa

Broad Scope of Work

• Loop extension and doubling of line to provide 3 x 100 wagon trains at 3 locations

• New Lephalale Yard for 100W trains

• Lengthening of loops at 6 locations for 3 x 200W trains

• Completion of the Lephalale Yard for 200W trains

• Upgrade of substations (6) from single to double units

New loops & extended loops of 6 x 200W trains with mixed diesel/electric locomotives (100 Electric and 100 Diesel) at (4) locations

• Electrification of the Lephalale to Thabazimbi.

• Operate 6 x 200W

trains with distributed power (DP) using dual power AC/DC locomotives from mine to destination without any locomotive change over at either Thabazimbi or Pyramid South.

Completion

2015/16 financial year

FEL3 study 2016/17 financial year

FEL3 study 2016/17 financial year

FEL3 study 2016/17 financial year

RichCor 81Mtpa Ramp up and sustain tonnage capacity to 81Mtpa

RichCor 81Mtpa

• 18 Locations 1_North West 1_Gauteng 11_Mpumalanga 5_Kwa-Zulu Natal

RichCor 81Mtpa

• yard upgrade projects eg Blackhill; Saaiwater; Vryheid • new substations (5 on the DC section and 3 on the AC section) • substation upgrades (6 on the DC section and 2 on the AC section) • Electrical (OHTE) feeder wire projects, covering 99 km • Locomotive workshop in Ogies • Locomotive turntable in Richards Bay • Package of infra and rolling stock condition assessment systems • Two Eskom projects strengthening the transmission line backbones to the AC and DC

Transnet traction power systems, and providing power connections to the new substations • Continue the ~ R37bn expansion and sustaining project to 81mtpa

Project Shongololo Optimize operational efficiencies on the Coal Line and reduce operational costs

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Project Shongololo

• FEL 2 - Pre Feasibility

Development stage,

- Study Contract to be

awarded

- Approximately 7 months

• Study to analyze

- Entire rail network

- Rolling stock

- Related systems

• Possible outcomes

- Eliminating dwell time at

yards

- Running more robust

trains

- Improving technology

2nd Overvaal Tunnel Remove bottleneck along the coal line by the existing tunnel and improve turnaround time.

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Second Overvaal Tunnel

• Existing tunnel – 30km South East of Ermelo

approx. 4km long

• Scope of Work:

- Construction of 2nd Overvaal tunnel

- and Provision of a signaled and electrified

double track

• 2nd Overvaal tunnel offset 20m from existing

tunnel

• FEL 3 stage – March 2015

Swaziland Rail Link Alternative route to assist relieve pressure on the Transnet Coal Line to Richards Bay, freeing capacity for heavy haul bulk coal traffic.

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Swazi Link

Bethal

Ermelo

Breyten

BSP Pullenshope

Halfgewonnen

Carolina

NEW

BIG BEND

NSOKO

LUBHUKU

MPAKA

LUSOTHI

GOBA

UMPALA

MAPUTO

Komatipoort

Buhrmanskop

2

4

16

18

16

18

6

12

810

LAVUMISA (2)

20

22

24

26

KINGHOLM

Mkuze

Hluhluwe

NEW

DAVEL

BELULUANE

NSESE

BORDER

RICHARDS BAY

Matshapa

Empangeni

PHUZUMOYA WEST

NEW

BAYALA

NEW

NCEMANE

PENICUIK

NYALAZI RIVER

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NEW

Work Package 1: Swazi Link

Work Package 3:Davel to Lothair(Line Section)

Wor

k Pa

ck. 4

: Si

dv–

Phuz

W

Wor

k Pa

ckag

e 6:

Gole

la-

Nsez

i

Work Package 7: Maputo Link

Wor

k

Pack

age

5:Ph

uz. -

Gole

la

Work Package 2:Davel Yard & Connections

• FEL 3 – Feasibility Engineering Complete • FEL 4 Light in progress • Business Case approval – April 2015

Navitrade RBTG Upgrading of the Bhizolo yard in Richards Bay to increase capacity to the RBTG Navitrade Terminal to 6Mtpa

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Navitrade RBTG

Navitrade Coal – from Mpumalanga and

Newcastle/Dundee

area to Richards Bay via

Vryheid

Service design: 2 shunts per day, 80 – 120

wagons

Actual activity: 1 shunt per day, 50 wagons

shortfall :

3 phased Plan - Study

- Phase 1: Operational Improvements

- Phase 2: Electrify 1 Arrival/Departure Line

- Phase 3: Reconfigure Bhizolo yard to introduce

two arrival and two departure lines,

and a bypass line.

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Navitrade RBTG

Anticipated tonnages by

study from the 3 phase plan

Year Coal Export CFL/ CFR Wagon types per day

2014 (currently) 1.8 Mtpa

2015 3 Mtpa 150

2016 4.5 Mtpa 200

2017 6 Mtpa 240

Later years +10-20 Mtpa 450

Maputo/Limpopo Coal & Magnetite An efficiency improvement initiative to reduce train operation activities in the yard.

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Maputo/LCM

Required FEL-3 level study

FEL-3 study outputs, which will be completed in March 2015.

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INDUSTRY FORUM

• Transnet Commodity Database • Coal Industry Forum – March 2015

• Shared progress on Expansion Projects

• Contact :Silindile Khuzwayo - database administrator silindile.khuzwayo@transnet.net

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Conclusion

Our Message

• Long term view • Investor Confidence • Emerging Miner capacity • Optimised investments • Informed view

Efficiency program

Capital Investment

program

Sustainable capital

program

Emerging Miner

Capacity

• RBCT

• RBTG

• Other

Loading facilities

Coal Industry Forum

Thank you