Zambia Rail to Benefit Barrick as Copper Freight Moves to Trains

Barrick Gold Corp. (ABX) and First Quantum Minerals Ltd. (FM), copper producers in Zambia, will be able to cut transport costs after a new railway won environmental approval to start construction this year.

The first trains will be ready to carry copper concentrate in 18 months, said Enoch Kavindele, chairman of North West Rail Company Ltd., which will build the line. The link will run from First Quantum’s Kalumbila mine in the North-Western province via Barrick’s Lumwana operation to the rail network at Chingola.

Most copper exports from landlocked Zambia, Africa’s biggest producer of the metal, are trucked to ports in South Africa and Tanzania. The government, which plans a toll system for roads, is also investing $120 million in refurbishing rail lines to shift freight on to trains and expand trade, benefiting mining companies by making deliveries cheaper and safer.

“The government has introduced a road toll act, so it will be very costly to transport concentrate and copper by road,” Kavindele, who served as Zambia’s vice president from 2001 to 2003, said today by phone from Lusaka, the capital.

Barrick and First Quantum declined to give immediate comment.

Zambia raised fuel prices by more than a fifth this month, making rail transport more competitive as trucks use at least twice as much energy to move a ton of goods over the same distance, said Stephan Krygsman, associate professor of transport economics at Stellenbosch University in South Africa.

Rail Financing

North West Rail has obtained about $375 million from U.S. investors including insurers, Kavindele said, declining to name any as he hadn’t yet informed them of the environmental approval announced by Zambia today. The Development Bank of Southern Africa Ltd. and the African Development Bank are also interested in financing the $500 million project, he said.

Yields on Zambia’s dollar-denominated bonds due 2022 rose to a record 6.096 percent by 1:55 p.m. local time. The kwacha, the country’s currency, strengthened 0.2 percent to 5.31 against the dollar.

In addition to the line linking Kalumbila and Chingola, North West Rail plans to extend the tracks westward to Angola to allow exports from the Atlantic Ocean port of Lobito, Kavindele said. This second phase would push the total cost for the 634-kilometer (394-mile) line to “slightly over $1 billion.”

The company is in talks with building contractors from South Africa, Brazil and Europe and expects to sign agreements “pretty soon” following the environmental approval, according to North West Rail’s chairman.

Zambian investors including Kavindele own 65 percent of the company, while U.S. investors hold 20 percent. U.K. banks have 5 percent and South African companies the remaining 10 percent, he said, declining to name the shareholders.

To contact the reporter on this story: Matthew Hill in Lusaka at mhill58@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net

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