SRK Consulting Sukulu Phosphate Project Scoping Report. 9 Transport Logistics Introduction

Transcription

1 Sukulu Phosphate Project Scoping Report Page i Table of Contents 9 Transport Logistics Introduction Expected Annual Tonnages Site Visits in Uganda and Kenya Meetings Held Rail - Road Network Capacities and Capabilities Rail Road Transport Importation Charges Exportation Charges Fuel Supply under Contract East African Fuel Companies Supply Fuel Storage Tanks Terms of a Fuel Supply Contract Freight Forwarding Services Containers Mombasa Port Area Estimated Pricing Schedules for Mombasa Shorehandling Wharfage Storage Shipping Line Charges Other Charges Customs Clearance and Logistic Management Bonded Warehouse at Tororo Railway Siding at Sukulu Conclusions and Recommendations

2 Sukulu Phosphate Project Scoping Report Page ii List of Tables Table 9.1: Expected Annual Tonnages Table 9.2: Estimated Railway Infrastructure Required Table 9.3: Estimated Importation Charges by Rail and Road Table 9.4: Estimated Exportation Charges by Rail and Road Table 9.5: Scope of Services offered by Freight Forwarders Table 9.6: Expected Operational Costs for Containerised Export Sales from Mine in East Africa Table 9.7: Shorehandling Charges at Mombasa Port Table 9.8: Charges applicable to Containers at Mombasa Port Table 9.9: Charges applicable to Extra Cargo Handling at Mombasa Port Table 9.10: Wharfage Charges applicable at Mombasa Port Table 9.11: Storage Charges applicable at Mombasa Port List of Figures Figure 9.1: Map of Rail link Mombasa to Tororo Figure 9.2: Example of Bonded Warehouse and Container Handling Equipment at Mombasa Port Figure 9.3: General Plan of the Mombasa Port

3 Sukulu Phosphate Project Scoping Report Page Transport Logistics 9.1 Introduction This section reviews the logistics facilities at Tororo, between Tororo and the port of Mombasa in Kenya and at the Mombasa port area. It deals with capacities and capabilities of the rail and road networks and the tariffs that would apply to these modes of transport. It also deals with services provided by freight forwarding companies and applicable tariffs, requirements for a bonded warehouse at Tororo, possible contract supply of fuel, customs duties and material handling requirements. This section has been extracted and adapted from a report Sukulu Study compiled by Mr Giancarlo Bonanno of Boss Freight Terminals located in Mombasa, Kenya, in June It also draws on SRK observations and records taken during the site visits and meetings with various companies in Uganda and Kenya in May The comments and opinions expressed in this section are thus appropriate as at June Any developments since then have not been considered. This is however unlikely to have any material affect on the conclusions drawn from this review of the logistics systems Expected Annual Tonnages The tonnages that are expected to be transported to and from the mine, and in what form (bags, containers, etc), are summarised in Table 9.1. Table 9.1: Expected Annual Tonnages Item Units Packaging Phase 1 Phase 2 Saleable Product SSP (tpa) 50kg polypropylene bag TSP (tpa) 50kg polypropylene bag Concentrate (tpa) 1t/2t bulk bags, in containers Consumables Mill Balls (tpa) 200l drums Sodium Silicate (tpa) 200l drums Oleic Acid (tpa) 200l drums Sodium Hydroxide (tpa) 25kg polypropylene bag Sulphur (tpa) 1t bulk bags Site Visits in Uganda and Kenya The following sites in Uganda and Kenya were visited by SRK engineers during May 2009: The Mining Lease area in Sukulu Hills, Tororo in Eastern Uganda; The proposed rail sidings and the existing rail spur connection into the railway sidings of the Tororo cement works; The Kampala Railway station, to view tracks, switches and passing points; The bonded container storage & handling areas at the Port of Mombasa; The Port of Mombasa break bulk, baggage plant & ship loading facilities.

4 Sukulu Phosphate Project Scoping Report Page Meetings Held Several meetings with personnel from logistics-related organisations in Uganda and Kenya were held during May 2009, as follows: Mr. E Iyamulemye, acting Chief Executive officer of Uganda Railways, in Kampala; Mr. J. T. Tuhumwire, Commissioner of Geological Survey & Mining, in Entebbe; The senior management team of Rift Valley Railways ( RVR ), headed by Mr. E. Kaijuka, Marine Manager, in Kampala; Mr. H. Shah, Managing Director of Union Logistics (Uganda) Ltd, freight forwarding specialists based in Kampala; Mr. Hanif Somji, Director of Freight Forwarders of Kenya, in Mombasa Port; Mr. G. Bonnano, General Manager of Boss Freight Terminal Ltd, container bonded storage and handlers, in Mombasa Port; Mr. J. O. Atonga, Chief Operations Manager of Kenya Ports Authority, Kenya; Mr. Brown Ondego, Executive Chairman of RVR, in Mombasa. 9.2 Rail - Road Network Capacities and Capabilities All discussions with the relevant management of RVR and Ugandan Railways concerned Phase 2 of the Project - the 1Mtpa of phosphate concentrate for export from Tororo in Uganda via Mombasa in Kenya, a distance of approximately 1 200km. Phase 1 production is for the internal market of Uganda and together with the phase 1 reagents and consumables, can be catered for within the present rail and road capabilities Rail The railways of Uganda and Kenya have been run since 1st November 2006 under a 25-year concession agreement signed by both Ugandan and Kenyan Governments, whereby the workforces, capital assets and infrastructure of both National railways were handed over to the control of the concessionaire, RVR. For this, RVR had to pay both Governments royalties of 11.1% of the revenue, to be received on a monthly basis. The problems with the services since RVR took over the operation of the railway have been well documented. The railway from Tororo to Mombasa is a single track configuration with passing points at every station (see Figure 9.1). SRK was informed that a number of the passing points were currently not in operation, due mainly to the lack of maintenance. This was confirmed during a site inspection at Kampala station. The inspection also revealed that the condition of the track was poor. Previous logistics studies for Sukulu detail a round trip of 8 days, which assumes that all passing points are in operation. A more realistic turnaround time is presently 9 to 12 days. Realistically, with a well maintained and operated system, the transit time from Tororo to Mombasa should be 46 hours.

5 Sukulu Phosphate Project Scoping Report Page 9-3 The present narrow gauge system of 1.0m has been in use since 1895 and has many speed restrictions in place (down to 25kmph) because of the condition of the track. The maximum train capacity with the current locomotives between Tororo and Mombasa is 648t. Previously, trains could carry up to 1 000t. The major challenges facing the rail network at this stage are: Shortage of Locomotives - RVR intends to overhaul its mainline locomotives beginning with one every month in the next financial year. This will be done with funding from lenders. Negotiations are at an advanced stage. Condition of the Railway Line - This needs some improvement. RVR plans to rehabilitate sections on the Mombasa - Nairobi line that are in poor condition. This is particularly in areas with a lot of curves. Wagons There is a shortage of rolling stock and reliability of the available units is not assured. Direct Investment - It has been stated that rehabilitation and investment will be expedited into areas which have direct commercial benefits for the concessionaire, particularly in handling and storage capacity at the rail head. Figure 9.1: Map of Rail link Mombasa to Tororo For railway transport to be feasible in Phase 2 of the Sukulu project, the railway companies of both countries will have to upgrade the railway infrastructure. The Kenyan Railway Corporation plans to start construction in Mombasa in May 2011, and reach Nairobi in 2013, then Kisumu and Malaba in RVR also has a programme that should be rolled out in the financial year 2009/10 to overhaul its locomotives and restore the hauling capacity to 1 000t. RVR has planned to re-open a number of

6 Sukulu Phosphate Project Scoping Report Page 9-4 stations that were previously closed to improve on train crossing points. They have confirmed that costs to cater for this improvement have been factored into their financial plan for 2009/2010. The Project requires moving both bulk material and containers on the same rolling stock. These tasks are fundamentally different, and this would mean that the system would be a hybrid. Such a system would be the most flexible method, which will allow imported equipment, spares and consumables to be transported on the same flatbed rail-wagons returning to Tororo. Each 40 foot flat wagon can carry two half-height 20 foot containers. The payload for each flat wagon would be 48t. The containers would need to be modified and strengthened to take the 24t load, the doors would also need to be removed and the sides re-plated. Railway infrastructure that would need to be provided to facilitate Sukulu product export from the Port of Mombasa, assuming a 9 day turnaround period, is set out in Table 9.2. Table 9.2: Estimated Railway Infrastructure Required Item Quantity Capital Cost (US$million) Diesel powered Type 9 locomotive of 900 tonne capacity Flat wagons c/w two modified 20 ft containers 625 Refurbished 17.7 New 39.1 Plant railway sidings, road level crossing and spur to the Tororo 16.0 railway line at the cement factory Railway sidings and container handling/unloading facility at 16.0 Mombasa The stockyard, stacker/reclaimer and ship loading facility at 18.0 Mombasa The total capital cost for the railway infrastructure will therefore be between US$137.7million and US$159.1million, depending on the availability of second hand containers and refurbished wagons. These are capital estimates that have been compiled by and would be incurred by RVR. It has been assumed that none of the costs in Table 9.2 would become a cost to the Sukulu project. The total operational expenditure for this system would be around US$15million per annum on maintenance and US$16million per annum on diesel. These are RVR operating costs and would be covered by any transport tariff paid by the project. It is interesting that the Kenyan and Ugandan railways corporations have recently signed a Memorandum of Understanding, and funding of US$40million is now available to design a wider gauge system of 1.435m, which will allow faster train speeds of up to 160kph Road Transport In comparison to the 600kt imported by rail into Uganda in 2008, only 100kt of products were exported. This means that with the present situation, 500ktpa of Sukulu concentrate could be moved by rail with the balance moved on road. Presently 3.5Mt of clinker is delivered by road to the Tororo cement factory with all trucks empty on the back haul to Mombasa.

7 Sukulu Phosphate Project Scoping Report Page 9-5 It is interesting to note that existing rail tariffs indicate an export cost of approximately US$23.50/t. This will be less if the axle restrictions can be lifted. Road costs of US$65 to US$80/t are typical, but it should be possible to negotiate advantageous haulage agreements with the truck companies, due to the transport costs for empties returning to Mombasa, that could match the RVR rail tariffs. This is seen as a possible option for Sukulu, a mix of road and rail transport. To move 1Mtpa by road, 80 trucks per day on average, each carrying around 35t, would be required. The continuing road deterioration must be considered when looking at this option. This would be the most expensive option. But the three options of transport to Mombasa will need to be costed as part of the phase 2 feasibility study. Road transport out of Dar es Salaam is also an option, but this route is around 1 600km and the vehicles would have to cross Lake Victoria by ferry. This alternative was deemed to be too expensive and was disregarded Importation Charges The estimated build-up of importation charges for materials and consumables brought in by containers for Sukulu are set out in Table 9.3. The unit costs by rail are shown to be US$97/t (20ˈ paired container) and US$115/t for a 40ˈ container. The equivalent costs by road are US$103/t and US$187/t respectively. Table 9.3: Estimated Importation Charges by Rail and Road Msa Port Transport Handling Shunt Handling Total Unit Cost Capacity C&F Containers Charges Msa - Tor Tororo Tor -Mine Mine Cost (t) (US$) (US$) (US$) (US$) (US$) (US$) (US$) (US$/t) Rail : Mombasa-Tororo-Mine 20' Paired ' Capacity Msa Port C&F Handling Shunt Transport Handling Total Unit Cost Containers Charges Mombasa Staging Msa-Mine Mine Cost (t) (US$) (US$) (US$) (US$) (US$) (US$) (US$) (US$/t) Road :Mombasa-Tororo-Mine 20' Paired ' Exportation Charges The estimated build-up of charges for the export of products from Sukulu by containers are set out in Table 9.4. The unit costs by rail are shown to be US$71/t (20ˈ paired container) and US$64/t for a 40ˈ container. The equivalent costs by road are US$68/t and US$87/t respectively.

8 Sukulu Phosphate Project Scoping Report Page 9-6 Table 9.4: Estimated Exportation Charges by Rail and Road Shunt Handling Transport Handling MSA Port C&F Total Unit Cost Capacity Containers Mine-Tor Tor Tor-Msa Mombasa Charges Cost (t) (US$) (US$) (US$) (US$) (US$) (US$) (US$) (US$/t) Rail : Mine - Tororo - Mombasa 20' Paired ' Capacity Handling Transport Handling Shunt MSA Port C&F Total Unit Cost Containers Tor Tor-Msa Mombasa Whs-port Charges Cost (t) (US$) (US$) (US$) (US$) (US$) (US$) (US$) (US$/t) Road : Mine - Tororo - Mombasa 20' Paired ' Fuel Supply under Contract East African Fuel Companies There are a number of fuel companies established in East Africa, some of them well known such as Shell and Total, and with some local experience in the provision of fuel supply and storage facilities to remote location sites (such as Geita, Tanzania). Other more specialised companies offer services in sourcing and transporting the fuel to a given destination. There are also specialised companies for building fuel tanks. Discussion with some of them has highlighted that a smaller local organisation would be prepared to offer services with dedicated material and human resources to this project Supply Fuel Storage Tanks There are a number of smaller but more specialised organisations in East Africa that are capable of building fuel tanks to international standards, with recognised reputation throughout the industry. Other companies specialise in the out-sourcing, supply and transport of the products to those tanks. An advantage of dealing with smaller, but more specialised organisations in East Africa would be to consolidate the expertise, build the tanks and then assure its supply and management in an effective and cost efficient manner. SRK understands there are a number of similar projects that have been undertaken successfully by local companies, whether for clients or for international fuel companies, their location, volume, cost, and reliability through time. Further study would be able to list those companies that are established and experienced in East Africa, determine their capacities and capabilities, equipment, management systems in place, list of clients that have already entrusted their similar business to them, and their achievements.

9 Sukulu Phosphate Project Scoping Report Page Terms of a Fuel Supply Contract The out-sourcing or sourcing, and eventually financing of the fuel supplies would be based on the Platt s index 1, and depend on the type of fuel, the quantities and the regularity of supply needed by the mine site. For the purposes of this scoping study, it has been assumed that the fuel storage and dispensing facilities and equipment at the mine site will be supplied free of charge by the Fuel company as part of their fuel supply contract. 9.4 Freight Forwarding Services A large range of logistics services are provided by a number of reliable forwarders in East Africa. These are branches of international groups and independent East African organisations. There are more than 574 freight forwarding companies registered in Kenya, but only a few would be suficiently reliable and experienced enough to be considered for the Sukulu Project. Those forwarders can be subdivided into two categories: the asset based companies and non-asset based companies. Asset based organisations often offer ISO certification whereby the quality of services can be controlled, through direct management of their fleet of trucks, low loaders, cranes, yards, logistic platforms, railway sidings, free and bonded warehouses, ICD s, CFS s, etc. Non asset based organisations which depend on the performance of their sub-contracted third parties, i.e. transporters, etc. Generally, the largest contracts (such as mining or oil and gas, civil engineering, etc) are awarded to asset based organisations that can demonstrate their capability of controlling their material resources (along with modern performance management systems) to perform the work. It is possible to find all the logistic services in Kenya of the size necessary for a large mining project. With more than 850 trucks leaving Mombasa on a daily basis to various parts of East Africa, the local transporters, often divisions of forwarders, offer excellent transport equipment, most of which are long haulage articulated trucks, low loaders and specialized modular hydraulic trailers of up to 150t pay load capacity. The general scope of services offered by the leading asset based forwarders in Kenya is shown in Table The Platt's Index is an attempt to give a broad view of the state of the oil industry by putting markets for several different crudes and products on the same footing: a base period, and a translation of that base period into the number Prices for each index component are averaged for that period, and the result constitutes 100 in the Platt's Index.

10 Sukulu Phosphate Project Scoping Report Page 9-8 Table 9.5: Aspect Front End Support: Procurement Support: International Freight East Africa Services plus South Sudan Supply Chain Management Plant Relocation Scope of Services offered by Freight Forwarders Description, Details Feasibility Studies Route Surveys Logistics Plans Expediting Status Reporting Assistance to Procurement Global Consolidation Freight Air and Sea Special Charters Air and Sea Custom Consultancy and Advisory Services Customs Clearance and Bond Management Road, Rail and Lake Transportation, heavy lift and heavy haulage, Express Delivery, Dangerous Goods Storage, warehousing, material handling. Dedicated Professional Project Management Integrated procurement, supply and logistic services Documentation Management Services Complete Site to Site services Mobilization on-site management and cargo preparation teams Heavy lift and heavy haulage In the case of large movement of cargo in one go, such as mobilisations or plant relocations, or the establishment of a thorough supply chain management system to a remote location, for import or export, it appears that the capacity, knowledge and experience to conduct such operations successfully already exists in Kenya and Uganda. Meetings with freight forwarding specialists in both Uganda and Kenya and the Mombasa Port authorities established the capabilities of the freight forwarding specialists and the ability to handle the extra export cargo, through the Mombasa port authority. The other important issue discussed was the various options available for carrying the ore in either bulk or containers. The following points were noted: The freight forwarding specialists have the capability of handling such an export contract. However, the Kenyan Freight forward company also has the ability to store containerized cargo, close to the Mombasa Port. This method of ore transport was highlighted as the most feasible solution, in previous Sukulu studies. The Kenyan freight forwarders also have a large road fleet of 60 trucks. These could also be utilized to move export cargo. Only 10% of potential rail export customers are serviced by rail transport by the Ugandan freight forwarders, due to restrictions/reliability of the railway service. The rest of the export cargo is being sent by road. This was confirmed in previous meetings with RVR. The Port authority presently has the capacity to handle either containerized or bulk handling at Mombasa. There are major expansion plans for the Port in place that will see the port expand its operations to the South of the existing Port facility, on the other side of the bay, with a dedicated road bypass to the West, linking up with the road in from the border and a rail terminal being constructed. This expansion should be completed within the next 3-5 years, so no future Port restrictions are envisaged. The advantage of using containers is the very low capital cost to establish loading and unloading facilities at the mine and port, and the fact that there are large bonded containerized stores with

11 Sukulu Phosphate Project Scoping Report Page 9-9 adequate storage capacity for Phase 2 close to the Port. The advantage of containers over break bulk and bulk is in negligible lost product due to spillages. Previous projects using bulk movements have recorded losses from spillages of up to 3%. For Sukulu with sealed bags in containers, losses will be almost zero. The high quality of construction of the container handling equipment and the foundations/roadways of the bonded stores areas of the Kenyan Freight forwarders based in Mombasa can be seen in Figure 9.2. Figure 9.2: Example of Bonded Warehouse and Container Handling Equipment at Mombasa Port Containers The exportation of the product for Phase 2 can be done through the port of Mombasa. The most cost efficient approach would be to use empty back-loads from trucks coming to Mombasa for reloading, combined with using the large amount of empty containers congesting the various shipping lines yards and ICD s in Uganda, in need of return cargo. Further study on the packing and carrying characteristic of the product will highlight more details, however it is safe to consider at this stage loading the product into 20 containers lined with a liner (or bladder) to contain this volatile product, which due to its fineness could also be affected by humidity.

12 Sukulu Phosphate Project Scoping Report Page 9-10 The handling of 1 to 2t bulk bags into open trucks or wagons would be initially difficult for the following reasons: There are few open trucks and wagons returning to Mombasa; Most of the trucks and wagons returning to Mombasa are transporting empty containers; Export containers are generally filled with major commodities of tea, coffee, etc, which could be contaminated by the Sukulu product. For the purpose of this exercise, the operational costs as shown in Table 9.6 could be expected. Table 9.6: Item Expected Operational Costs for Containerised Export Sales from Mine in East Africa Sales (tpa) Road Freight (US$ 000 / year) Various Port (US$ 000 / year) Phase 1 SSP (in 50kg bags) TSP (in 50kg bags) Total phase Phase 2 SSP (in 50kg bags) TSP (in 50kg bags) Concentrate (in 1-2t bulk bags) Total phase The existing transport systems available to Nilefos can accommodate the Phase 2 export quantities, but it would not be the cheapest option available. The phase 2 feasibility study must thoroughly investigate the various options available to Nilefos and recommend the most feasible solution in terms of system reliability, capital and operational costs. SRK would work with the Kenyan freight forwarders and the Port authorities to evaluate the transportation of the larger quantity of product by rail (only or mainly) whether to a specifically appointed location around the port of Mombasa (that does not interfere with day to day operations) or through private railways to the proposed deep sea port of Lamu (in the north of Kenya) and the loading facilities required for such product. 9.5 Mombasa Port Area Currently, the Port of Mombasa includes Kilindini Harbour, Port Reitz, the "Old Port", Port Tudor, and the whole of the tidal waters encircling Mombasa Island (see Figure 9.2). It is one of the largest and most important ports along the East Africa Coast, as it is strategically located to serve the rich commercial, agricultural and industrial hinterland of Kenya and the land-locked countries of Uganda, Rwanda, Burundi, Eastern part of the Democratic Republic of Congo and Southern Sudan. The Port of Mombasa has an enormous recognised potential for many shipping opportunities for transshipment and transit cargo. The Kenya Ports Authority ( KPA ), whose mission is to promote national and international development through the provision of efficient and cost-effective port services, manages the Port of Mombasa. Its vision is to be rated among the top 20 ports in the world by the year 2010 in terms of reputation and efficiency. The KPA is also responsible for the operation of all ports and inland

13 Sukulu Phosphate Project Scoping Report Page 9-11 container depots in Nairobi, Kisumu and Eldoret (the latter not being operational and leased to Moi University). The port is served by both road and rail, with cargo transiting via the northern corridor to the interior countries of Uganda, Rwanda, Burundi, Sudan and Democratic Republic of Congo. Figure 9.3: General Plan of the Mombasa Port In 2008, the port worked ships, with the highest number being in January when 110 ships were handled. The average berth occupancy was 89% for the container terminal and 52% for general cargo, up from 85% and 40% respectively in the previous year. The average waiting time was 2.5 days with a port dwell time of 5 days. The port of Mombasa handled 16.4Mt of cargo in 2008, up from 15.9Mt in It is planned, but not yet officially gazetted that 20 hectares of land beyond the containers terminal will be converted into port facilities within the coming 5 to 10 years. The project seems to have already found its sponsors and financiers and will be developed along with a causeway linking directly the Nairobi road, hence avoiding all Mombasa town traffic and suburbia. Several other development projects are planned, such as the rehabilitation of the G-section and the Kenyan Navy berths. The port has an average draft of 10m. The port facilities include: Berths, Wharves and Jetties: o 13 general cargo berths with quay length of 2 448m;

14 Sukulu Phosphate Project Scoping Report Page 9-12 o 3 container berths with quay length of 596m, back-up area of about 20 hectares and total capacity to handle TEUs per annum. The container terminal complex (constituted of three berths) has 72 reefer points for refrigerated containers. o 2 bulk oil jetties (tanker berths); one for crude oil (the Kipevu Oil Terminal) and the other for refined oil products (Shimanzi Oil Terminal). Facilities: o 3 dry bulk wharves with a total quay length of 315 meters. o 2 dhow jetties (at Mombasa 'Old Port"). o Facilities for handling bulk cement (at Mbaraki and English Point), bulk molasses and tallow, edible oils, and other bulk liquids. o Grain bulk handling Ltd for bulk grains. Sheds, Stacking grounds etc. o 13 main quay transit sheds with a total floor area of m 2. o 7 back of port sheds with a total floor area of m 2 o Stacking grounds with a total area of m 2. Cargo handling Equipment/Appliances (a) Container Terminal o 4 Ship-to-Shore Gantry Cranes (40 tons) o 9 Rubber-Tyred Gantry Cranes (40 tons) o 2 Rail-Mounted Gantry Cranes (40 tons) o 62 Terminal tractors o 7 Reach stackers o 3 Front loaders o 2 Empty Container Handler o 4 Shunters (b) General Cargo Berths o 32 Portal electrical travelling cranes with capacity of 3-20 tons. o Portal electrical fixed cranes with capacity of 2-5 tons o 3 Mobile Cranes with capacity of tons. o 6 Multi-purpose forklift trucks with capacity of tons. o Overhead belt conveyors for bulk soda ash with a capacity of 110 tons per hour. o 17 forklift trucks of 3-5 tons capacity. Dry-dock facilities In addition to adequate port facilities, the Port of Mombasa boasts one of the largest drydock facilities along the East African Coastline, which offers comprehensive ship repair services. Operated by African Marine and General Engineering Company Limited, this facility has a dry dock measuring 180m long and a smaller one with a length of 40m. The facility has enhanced Mombasa s position as a major and vital repair port along the East African Coastline.

15 Sukulu Phosphate Project Scoping Report Page Estimated Pricing Schedules for Mombasa Shorehandling A summary of the charges applicable to conventional / break bulk cargo is set out in Table 9.7. A vessel is deemed to have arrived at the port when she has entered the harbour limits and reported her presence to the pilot. Free period will commence from the date of completion of vessel s discharge. Landing is when the item touches the quay. Table 9.7: Shorehandling Charges at Mombasa Port Item US$ Rate Unit Comment Shorehandling - Conventional Break bulk / conventional 7.50 W/M On landing Dangerous cargo (surcharge) 10% Of above On landing Heavy Lift Conventional Lift from 14 DWT to 40 DWT Per lift Nil Lift over 40 DWT Per lift Nil Awkward package Per lift Over 46m 3 Note Kenyan cargo is subject to VAT of 16% The heavy-lift charge is applicable irrespective whether the cargo is directly discharged on to truck or not, as the Kenya Ports Authority ( KPA ) considers heavy lifting, whether performed by shore crane or ship s crane, to require special attention by a KPA special heavy lift gang, hence generating the above charges. The charges applicable to containers are summarised in Table 9.8. An out-of-gauge container is any container including High Cubes which contains cargo of which the dimensions exceed any of the external dimensions of the container in or on which it is carried, or any container which cannot be handled by means of standard container handling equipment. This includes ISO standard containers that have been damaged and consequently cannot be handled by means of standard container handling equipment. Such containers are handled at owner s risk. Table 9.8: Charges applicable to Containers at Mombasa Port Item US$ Rate Unit Comment Shorehandling ISO Containers Container 20ˈ ˈ On landing Container 40ˈ ˈ On landing Dangerous cargo (surcharge) 10% Of above On landing Shorehandling Out-of-Gauge Containers Container 20ˈ ˈ On landing Container 40ˈ ˈ On landing Dangerous cargo (surcharge) 10% Of above On landing Note Kenyan cargo is subject to VAT of 16% Where extra handling of cargo is required, additional charges are levied as set out in Table 9.9.

16 Sukulu Phosphate Project Scoping Report Page 9-14 Table 9.9: Item Charges applicable to Extra Cargo Handling at Mombasa Port Transfer within the Port Area Empty containers will be charged 60% of the above Verification, Scanning, Inspection, Stripping or Stuffing Re- marshalling charge on expiry of free period for both domestic Import Empty containers will be charged 60% of the above 20ˈ Container 40ˈ Container Comment days from landing Wharfage A summary of the wharfage charges applicable to containers and conventional cargo is set out in Table Table 9.10: Wharfage Charges applicable at Mombasa Port Item US$ Rate Unit Comment Break bulk / conventional 5.00 WM On landing Container 20ˈ ˈ On landing Container 40ˈ ˈ On landing Note Kenyan cargo is subject to VAT of 16% Storage A summary of the storage charges applicable to containers and conventional cargo is set out in Table Table 9.11: Storage Charges applicable at Mombasa Port Item US$ Rate Unit Comment Storage Conventional & ISO Break bulk / conventional 1.50 WM per day After 10 days Container 20ˈ ˈ per day After 7 days Container 40ˈ ˈ per day After 7 days Storage Dangerous Cargo Container 20ˈ ˈ per day On landing Container 40ˈ ˈ per day On landing Storage Out-of-Gauge Containers Container 20ˈ ˈ per day After 2 days Container 40ˈ ˈ per day After 2 days Note Kenyan cargo is subject to VAT of 16% The are a number of penalties that can be levied by the KPA, as follows: Mis-declaration of Weight, Measurement or nature of cargo/goods attract a penalty of 100% on the correct weight, measurement or nature chargeable; In the event of mis-declaration and the Authority s equipment is used in handling an over-weight cargo unit, the party or parties causing such use are held liable for all losses, claims, demands

17 Sukulu Phosphate Project Scoping Report Page 9-15 and suits for damages including death and personal injury, legal and court expense, directly and indirectly resulting from such use; Non-declaration of Dangerous Cargo attracts a penalty of 50% on the chargeable rates; Late submission of documents for conventional cargo attracts a penalty of US$1.50 per day per tonne or part thereof; Late submission of documents for containers attracts a penalty of US$25.00 and US$37.50 per day per container for 20ˈ and 40ˈ respectively; Alterations/Certification/Cancellation per document are charged at US$5.00; Imported motor vehicles exiting the Port Area after expiry of the Gate Pass attract a charge of US$10.00 per unit per day or part thereof; Loaded Trucks/ vehicles exiting the Port Area after expiry of the Gate Pass attract a charge of US$10.00 per truck per day or part thereof; Requests for Late acceptance of Export cargo attract a penalty of US$75 per container and US$4/t for conventional cargo Shipping Line Charges These charges are usually levied by shipping lines and their agent in Mombasa, at the time of releasing cargo and documents; however these charges as quoted by each shipping line are not fixed and can vary with or without prior notice. In case of charter or part-charter vessel, the shipping line charges will be dictated by the agent of the vessel in Mombasa (nominated by the Shipowner). The charges that can be levied include: Release of documents; Terminal Handling charges; International port safety surcharge; Cleaning charges and lift-on/lift-off. The terminal handling rate for break bulk conventional has increased from US$8.30 to a current US$10.00 per Weight Measurement ( WM ), some Lines are charging US$11.00 and there are current suggestions to fix the rate at US$12.50 in the near future. The shipping lines charges are an estimation of what all shipping lines agents are charging in Mombasa, but are not based on a Government controlled set tariff for a fixed period Other Charges There are a number of other charges that can be levied within the port area and include: Customs warehousing rent charges; Duties and taxes (if applicable); MSS levy; Bond (delayed documents) (if applicable); Survey fees.

18 Sukulu Phosphate Project Scoping Report Page Customs Clearance and Logistic Management The following fee covers all customs clearance and logistic management operations for the project. The usual flat fee includes all operations of pre-documentation, customs advisory services, all preclearance of the cargo for transit in Kenya, all application for direct loading, shunting of the cargo to logistic platform, all assistance and cargo handling management at the port, at the logistic platform, all the cargo monitoring and reporting to the client, the setting of a project team dedicated to the management of this project until its completion. This is typically US$12.50 per WM. 9.7 Bonded Warehouse at Tororo The establishment of a bonded warehouse in Tororo would serve to receive material and equipment from overseas or pan-african for use on site, or alternatively for storage of final product that has been given customs clearance but not yet dispatched. Initial investigations suggest that adequate customs clearance facilities exist in Tororo to handle the importation of goods and exportation of product envisaged for the Phase 1 and Phase 2 production scenarios. No allowance for a bonded warehouse has therefore been made in the scoping study. Set out below are the principles that would have to apply if the decision is made to include such a bonded warehouse in the project scope. The use of this warehouse could be re-defined as a bonded area comprising of: Yard with storage bays : for large equipment and rolling stocks Main Warehouse : for bulk shipment Equipped stores : with cargo inventory management; This could be redefined in time regarding the general activity of the site as: Mobilisation phase - There will be little use of a bonded warehouse during this phase. Most of the cargo will be cleared duty and tax free in Uganda, therefore no need of bond. The warehouse as such does not really need to be built yet, as most of the equipment can be stored in an open yard. It is this open yard, once cleared of all the mobilisation equipment that can be used for building a warehouse and a store (to replace the temporary storage in containers for the workshops and spares). Consignment stock - Depending on the mine s contract, the largest suppliers (such as tires, spare parts for capex, etc) will be invited to carry to site their own stock, in order to minimize the supply / transit delay to procurement / usage. By doing so, it is common to see mining companies opening their (or part of their) warehousing facilities to their main suppliers (at their cost). Supply Chain Management - The supplies of the mine will be clearly subdivided in three parts: o The reagents and bulk items (grinding media, etc) o The spare parts o The consumables (except liquids). It is most likely that the first category will not need to be stored in a warehouse or in a bonded area, as it will most probably be imported free of duties and taxes in the country. The mine will however

19 Sukulu Phosphate Project Scoping Report Page 9-17 prepare a landing area next to the production / usage site. The spare parts and consumables will most likely be subjected to different type of exemptions of duty and taxes, or none at all. Therefore the warehouse will be very useful to speed up the import process (under bond) to the warehouse and clear the cargo on a need-be basis. The warehouse should be fitted, for this type of operation, with water control and waste management, power supply, ventilation and pest control, general security. The inside of the warehouse should be fitted with bays and storage structure. A number of forklifts will be required to collect and deposit the incoming cargo that has been priority checked and sorted. The warehouse should be managed by an electronic inventory management system, linked with accounts and productions (PO s and PR s) on a real time basis. The size of the warehouse will depend on the mine s bills of quantity as to its volume of operations and the number of tasks that are subcontracted (drill and blast, earth moving, mining, etc). 9.8 Railway Siding at Sukulu It has been assumed that the Sukulu railway siding needed for phase 2 of the project can be linked into the existing siding that serves the nearby cement plant. No connection fees or access charges have been allowed for in this respect, but it has been assumed that the Sukulu project will maintain the whole of the new Sukulu siding as well as that portion of the cement plant siding that will be used by Sukulu. 9.9 Conclusions and Recommendations The existing transport systems available to Nilefos can accommodate the Phase 2 export quantities, but it would not be the cheapest option available. For evaluation purposes of the Sukulu project, the following assumptions have been made: All mine consumables and final product for phase 1 can be transported within the existing road/rail network system and capabilities; All capital repairs/ upgrades to the Mombasa-Tororo railway network to enable the phase 2 production targets are carried by the concessionaire and are not a project-related cost; The operating costs for the railway system would be covered by any transport tariff paid by the project; The fuel storage and dispensing facilities and equipment at the mine site will be supplied free of charge by the Fuel company as part of their fuel supply contract; No bonded warehouse is required at Sukulu; The Sukulu railway siding needed for phase 2 can be linked into the existing siding that serves the nearby cement plant without any connection fees or access charges becoming due. Initial investigations suggest that adequate customs clearance facilities exist in Tororo to handle the importation and exportation of material. Should this not be the case, the cost of establishing and operating a bonded warehouse would need to be investigated as part of the feasibility study.

20 Sukulu Phosphate Project Scoping Report Page 9-18 It is recommended that a more detailed transport study be undertaken as part of the phase 2 feasibility study. The feasibility study must thoroughly investigate the various options available to Nilefos and recommend the most feasible solution in terms of system reliability, capital and operational costs. SRK would work with the Kenyan freight forwarders and the Port authorities to evaluate the transportation of the larger quantity of product by rail (only or mainly) whether to a specifically appointed location around the port of Mombasa (that does not interfere with day to day operations) or through private railways to the proposed deep sea port of Lamu (in the north of Kenya) and the loading facilities required for such product. SRK also recommends that a detailed logistics study for the transport of plant and equipment from Mombasa to the mine during the construction be undertaken as part of the feasibility study.