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Leveraging extractive industry investments for domestic infrastructure needs: Rail and Port June 2014. Rail & Port Proposals to Service Iron-Ore Projects in Western and Central Afric a. Framework. (Step 1) Mining and Infrastructure Project in Perspective.

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Rail & Port Proposals to Service Iron-Ore Projects in Western and Central Afric a

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Rail port proposals to service iron ore projects in western and central afric a

Leveraging extractive industry investments for domestic infrastructure needs:Rail and PortJune 2014


Rail port proposals to service iron ore projects in western and central afric a

Rail & Port Proposals to Service Iron-Ore Projects in Western and Central Africa


Framework

Framework


Step 1 mining and infrastructure project in perspective

(Step 1) Mining and Infrastructure Project in Perspective


Step 1 determining potential demand for third party access

(Step 1) Determining Potential Demand for Third Party Access

Forestry Potential

Mining Concessions

  • Historical rail and port throughput (if brownfield)

  • Road haulage along corridor that is suitable for rail

  • Project proposals

  • GIS mapping

Source: MTC


Rail port proposals to service iron ore projects in western and central afric a

(Step 1) What should be on rail?

Distance: Truck vs. Rail Prices in the USA

Goods: Tons by Commodity in China

Source: WB 2011 Rail Reform


Step 1 understanding the players and interests

(Step 1) Understanding the Players and Interests

  • Prefer vertically integrated single user model

  • The more players involved, the higher the risk

  • Worst scenario with multi-user and multi-purpose access with unallocated capacity at financial close

  • Multi-purpose access to infrastructure

  • Transit fees

  • Multi-user access

  • Third party operating the rail and port infrastructure

  • Smaller mining companies may prefer a haulage regime

  • Large-scale subsequent parties may want their own infrastructure solution

  • Multi-purpose access

  • Strong government intervention

  • Cross-subsidization

  • Maximize benefits of the extraction of resources, but different views on what should be prioritized:

  • Ministry of Finance – Tax revenues

  • Ministry of Industry – Local processing

  • Ministry of Transport – access to infrastructure

  • Maximize returns of its investment

  • Control design, and operation of fully integrated logistics corridor

  • Scope for shared investment/use if does not interfere with own operations

  • Against multi-purpose access


Step 1 the importance of timing

(Step 1) The Importance of Timing


Step 2 cost benefit analysis of open access

(Step 2) Cost Benefit Analysis of Open Access


Step 3 level of government intervention

(Step 3) Level of Government Intervention

1

INTERVENT

ION

SCENARIOS

2

3

4

5


Step 3 legal framework

(Step 3) Legal Framework

Open Access Regime

Regulatory Body

1

  • Blanket-open access regime vs. industry specific regime

  • Regulation to apply to all access seekers and not only to the same industry

  • Important to clearly draft regulation to achieve open access

  • Mining contract should not contradict legislation

SCENARIOS

2

3

  • Monitor non-discrimination of access

  • Monitor/regulate access charges and tariffs

  • Guarantee infrastructure investments & expansion opportunities

  • Analyze and arbitrate access complaints

4

5


Step 3 infrastructure ownership

(Step 3) Infrastructure Ownership

Government Participation Options

Ownership Models*

1

Leading mining company

SCENARIOS

2

Mining companies (SPV)

3

  • Mining companies (SPV)

  • Tender to third party

  • Free equity

  • Golden share

  • Financed equity

4

  • Multi-purpose (SPV)

  • Tender to third party

5

*Government should always retain ownership and control of the right of way


Step 3 infrastructure design

(Step 3) Infrastructure Design

Company/Companies to design infrastructure which maximizes efficiency

1

SCENARIOS

2

  • Excess capacity

  • Potential double track on railway

  • Expansion considerations

3

  • Multi-purpose

  • Additional quays at port

  • Service road

4

Regional gauge on railway

5


Liberia infrastructure design

Liberia – Infrastructure Design

The PutuIron Ore Mine in South East Liberia will build its own railway line and port facility.

The contract design lays the foundations for future expansion of rail:

“The Railroad shall be designed so that it can be expanded on a commercially feasible basis to carry on a continuing basis twice as much traffic as is contemplated by the preceding sentence…”

And port:

"The Port shall be designed and constructed such that it can be expanded on a commercially feasible basis to handle twice as much capacity as is contemplated by the preceding sentence. Such expansion capacity shall include the possible construction of an additional 50 meters on the Iron Ore jetty and the driving of iron ore jetty piles at least 5 meters deeper. The Port basin shall be designed to facilitate further large scale development consistent with any expansion of the railroad (e.g., lengthening of primary wharf, room for additional wharf, or adequate protected anchorage).”

“The land side of the port shall be designed to facilitate future expansion and public or third party access to general petroleum products and general cargo storage and handling facilities.”


Step 3 operating model

(Step 3) Operating Model

Vertically Integrated

  • High

SCENARIOS

1

2

Haulage Regime*

3

4

5

Choice to be made according to regulatory/ monitoring capacity

  • Corridor Efficiency

Access Regime

  • Low

  • Low

  • High

  • Non-Discriminatory Access Potential

*Yet to be tested in practice


Step 3 regulator attributes

(Step 3) Regulator Attributes


Step 4 what should be the negotiation points

(Step 4) What Should be the Negotiation Points?

1

INTERVENT

ION

SCENARIOS

2

3

4

5


Step 4 selected negotiation points

Step (4) Selected Negotiation Points

SCENARIOS

1

2

3*

4*

5*

* Government will need to grant leading mining company founding rights & capacity allocation guarantees

18


Step 4 government negotiation tactic

Step (4) Government Negotiation Tactic


Keep ict sector in mind when discussing railway project

Keep ICT sector in mind when discussing railway project

Service Arrangement

Ownership model

1. Mine builds own infrastructure

a) Telecom adds capacity.

b) Mine adds telecommunication capacity and leases to Telecom.

a) Companies building required infrastructure to mines (e.g. power, pipeline and railways) add telecommunication capacity at a lower cost.

2. Mine does not build own infrastructure

b) Mine provides anchor demand for Telecom.

c) Government, Telecom and mining companies coordinate efforts and investments.


Mines build infrastructure

Mines Build Infrastructure

Win - Win

  • Example: Peru

  • MineraAntamina built fiber optic network along slurry pipeline which Telefonica del Peru uses to provide ICT services.

  • Mine maintains social license

  • a. Telecom adds capacity

  • Telecom expands coverage

Source: Antamina

  • Example: Malaysia

  • Celcom and Petronas build fiber optic network along gas pipeline with spare capacity.

  • Mine maintains social license and adds revenue

Source: Agilent

  • b. Mine adds telecommunication capacity and leases to Telecom

  • Example: Brazil

  • In 2001 Vale wanted to partner with railroad partners and install fiber optic along 10,000km of rail lines and lease to Telecoms.

  • Telecom expands coverage

Source: Globo


C ompanies building required infrastructure to mines add telecommunication capacity at a lower cost

Companies building required infrastructure to mines add telecommunication capacity at a lower cost

  • Objective: Leveraging economies of scope by sharing with other infrastructure industries (such as power utilities, water and sewage pipelines, railways)

  • Rationale: A large part of the costs is associated with costs of civil works.

  • Example: Canada

  • De Beers mine allowed power utility FNEI to use electricity grid infrastructure to build fiber optic cable.

  • FNEI with local municipalities then formed Western James Bay Telecommunications Network (WJBTN) to operate and provide telecommunications services.

Source: Five Nations Energy

  • Example: Potential in Mozambique – Nacala Corridor:

  • Vale and Mozambique Ports and Railway (CFM) selected Siemens to install microwave-based telecommunications network for track-to-train data transmission.

Source: InternationalRailway Journal


Rail port proposals to service iron ore projects in western and central afric a

CCSI’s Framework for Shared – Use:

http://ccsi.columbia.edu/work/projects/leveraging-infrastructure-investments-for-development/


Rail port proposals to service iron ore projects in western and central afric a

Agree on the 5 key points that your colleagues which were not part of this breakout session should know about mining related rail & port infrastructure


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