Investment outlook: what investors are looking for - John Meyer, SP Angel
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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
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Investment outlook: what investors are looking for - John Meyer, SP Angel
- 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)
- 6. 6 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
- 7. 7 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)
- 12. 12 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
- 13. 13 Contact Us SP Angel Prince Frederick House 35-39 Maddox Street London W1S 2PP Tel: 020 3463 2260 Fax: 020 7493 0250 Website: www.spangel.co.uk