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STATUS OF THE RGR CONCESSION

STATUS OF THE RGR CONCESSION.

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STATUS OF THE RGR CONCESSION

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  1. STATUS OF THE RGR CONCESSION Spoornet participated in a process that started in 1997 to award railway concessions in Mozambique. In January 2003, a concession agreement was signed between the to be formed Ressano Garcia Railway Company, Spoornet, New Limpopo Bridge Projects Investments (Pvt) Ltd, The Mozambique Government and CFM, the Mozambique Railway Company.

  2. Ressano Garcia Railway (SQRL) Shareholding Structure New Limpopo Bridge Projects Investment (PVT) Ltd (NLP”) SPOORNET 74% 26% NLPI/SPOORNET Consortium (51%) Portos E Caminhos de Ferro De Mozambique (CFM) (33%) Local Investors (16%) Ressano Garcia Railway (SQRL) RGR OMU Agreement (Operate, Maintain, Upgrade) 7 Years Spoornet Mozambique (Operator)

  3. BACKGROUND • Spoornet would be responsible for the operation, maintenance and upgrading of the line in accordance with an OMU Agreement to be negotiated between RGR and Spoornet • Progress on the implementation of the concession was initially delayed pending clearing of landmines along the railroad, and its associated servitudes where construction/upgrading activity would be taking place. • This clearing process was completed mid 2004. • Spoornet received the final proposed draft of the OMU agreement form RGR in July 2004.

  4. BACKGROUND (Continue): • The proposed terms of this agreement raised questions around the equitable distribution of risk and return between the parties, which needed to be intensively negotiated. • At the same time, the analysis of the future of Spoornet’s GFB business indicated that the proposed capacity of the line would not meet Spoornet’s strategic objectives, and the feasibility of upgrading from 18 tons/axle to 20 tons/axle, with longer trains, needed to be assessed. • The impact on track standard, length of loops, bridges etc., would entail significantly higher capital investment, which needed to be considered and approved by Spoornet and Transnet and RGR.

  5. CURRENT EXPECTATIONS (dependent of finalizing agreement between shareholders):- • Conclude OMU agreement by en June 2005. • Initial upgrade work to commence July 2005 extending for 6 months to remedy deterioration. • Operations under the Concession with track condition dependent capacity (to be confirmed), to commence in December 2005/January 2006.

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