SOUTH AFRICAN transport holding group Transnet signed Heads of Agreement last month with mining company Kumba Resources, paving the way for upgrading of the Sishen - Saldanha iron ore line.

Announced by Transnet CEO Maria Ramos on March 7, the agreement follows intensive negotiations since August 2004 (RG 3.05 p121). It clears the way for a five-year expansion programme totalling R7·5bn.

Transnet will invest R3·9bn in improvements to the 861 km heavy-haul railway, lifting capacity from 29 million tonnes a year to 41 million. This will include the purchase of new high-capacity wagons and 69 locomotives, together with infrastructure improvements. Another R600m will go on capacity expansion work at the Saldanha Bay port on the Atlantic.

Under its share of the agreement, Anglo-American subsidiary Kumba will invest R3bn in new mines at Sishen, which are expected to come on stream in 2007. Kumba is already the world's fifth largest ore exporter, and the increased output is expected to lift its share of the traffic on the rail link from 23·5 million tonnes a year to 35 million.

As part of the deal, Kumba has agreed to pay Spoornet's tariffs in rand instead of US dollars, under a 23-year contract reviewable at five-year intervals. The previous contract proved financially disastrous for Spoornet following the improvement in the value of South Africa's currency in recent years.