Transnet Freight Rail News Briefs Page 1 of 9

COMMODITY NEWSBRIEFS: 6 OCTOBER 2014 Please note that these articles are available in electronic format and can be requested and delivered via e-Mail.

(http://intra.spoornet.co.za) Natasha.Havenga@transnet.net

DISCLAIMER

The information contained in this publication is for general information purposes only. The information is provided by Transnet Freight Rail, a division of Transnet Limited, and while we endeavour to keep the information up to date and correct, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the publication, or the information, products, services, or related graphics contained in the publication for any purpose. Any reliance you place on such information is therefore strictly at your own risk. In no event will we be liable for any loss or damage including without limitation, indirect or consequential loss or damage, or any loss or damage whatsoever arising from loss of profits arising out of, or in connection with, the use of this publication. This publication may refer to other publications which are not under the control of Transnet Freight Rail. We have no control over the nature, content and availability of those other publications. The inclusion of any other publications or other website links does not imply a recommendation or endorse the views expressed within them. Every effort is made to keep the content of the publication correct and complete. However, Transnet Freight Rail takes no responsibility for, and will not be liable for information in the publication being incorrect or incomplete. Transnet Freight Rail also does not guarantee the availability of the publication at any specific intervals

AUTOMOTIVE AUTO ENTERPRISE HUBS FOR GAUTENG (Business Report, 6/10/2014) A host of automotive enterprise hubs are to be established in Gauteng townships as part of a multimillion-rand initiative that aims to uplift the skills and competencies of informal automotive businesses, address youth unemployment, and boost economic growth. The initiative is being driven by the Automotive Industry Development Centre (AIDC) in conjunction with the Gauteng provincial government, which has launched a pilot project in Winterveld near Pretoria. Part of the plans include the creation of a tendering process to allow small, medium and micro enterprises (SMMEs) to gain access to the thousands of vehicles in the SAPS and Gauteng government fleets. Manilal said the aim of the initiative was to be a catalyst for growth of the many informal auto body repairers and other motor-related entrepreneurs in the townships that did not have the required support, market access, access to funding or specialised equipment. INDUSTRIAL BIG BUSINESS VOTES WITH ITS FEET (The Times, 6/10/2014) A great trek of companies from South Africa is under way, even as the government talks of "reindustrialising" the economy. Multinational companies increasingly view their South African operations as "orphan assets", says Investment Solutions economist Chris Hart, pointing to plans by mining behemoth BHP Billiton to "demerge" most of its local mines into a separate company. Billiton is not alone. Furniture giant Steinhoff International got the go-ahead from the Reserve Bank in July to move its primary listing to Frankfurt, the first major corporate move abroad since those by Anglo American, Old Mutual and SABMiller 15 years ago. Since Steinhoff got the nod other companies have approached the Reserve Bank to do similar deals. Sasfin economist David Shapiro says companies are "silently leaving", seeking better projects and opportunities elsewhere. The manufacturing sector has in the past six years shrunk from 16.4% of the economy to 11.1%. In the same period "general government services" have swelled from 12.4% of GDP to 17.2%. "The government has been pushing the private sector out of the economy for the past five years," says Hart. It is not only feeble economic growth - forecast by most economists to reach only about 1.5% this year - that is convincing big corporations to move. A policy analyst at the South African Chamber of Commerce, and Industry, Pietman Roos, says the high cost of doing business here and general unpredictability of policy changes are major reasons. "Several policy suggestions, including the investment bill, the Private Security Industry Regulations Amendment Bill and the agricultural property policy, contain direct threats to property rights. It is understandable if investors feel wary of even expanding their footprint," says Roos. Other big moves include: Gold Fields

Transnet Freight Rail News Briefs Page 2 of 9

last year unbundled Sibanye Gold; Logistics company Bidvest plans to list its food business, one of its most lucrative divisions, in London; Sasol, the largest industrial company in the country, is making one of this decade's largest foreign investments in the US; and AngloGold Ashanti, the third-largest gold miner in the world, tried to split its assets into a South African bundle and the rest. Shareholders were not keen to fork out more than R20-billion to ensure that the entity would be debt-free, a condition set by the Reserve Bank. Greener pastures are not necessarily over the ocean. The Automotive Leather Company, a manufacturer based in Pretoria, is relocating to Lesotho to cut costs, it was reported last week. The move could result in the loss of as many as 600 jobs. "We are the 'sick man of the emerging markets'," says Hart. South Africa used to be attractive as an emerging market because of its good capital markets and because it was big enough to form a critical mass for investors. South Africa slips a few places down the World Economic Forum's global competitiveness report every year, dropping to 56th in 2014. "When you are attractive, you attract capital easily. You don't have to do all sorts of peculiar things," says Hart. TARIFF HIKE FOR ESKOM ‘WILL BE JUST THE START (Business Day, 6/10/2014) The National Energy Regulator (Nersa) has granted Eskom a 12.69% rise in electricity prices for next year, double the rate of inflation, a development economists believe is just a taste of things to come. The price hike is bad news for both consumers and business, and is likely to put a damper on an already struggling economy. Inflation is expected to average 6.2% for the year, the Reserve Bank said last month. Rating agency Standard & Poor’s (S&P) said it would make a decision on Eskom’s debt, which could see it cut to junk status, after these details were disclosed. The Treasury has said only that the rescue plan will include a capital injection and an increase in state-guaranteed debt. On Friday Nersa said it would allow Eskom to raise electricity prices 12.69% in April, to help it recover R7.8bn in unbudgeted costs. The increase is 4.7 percentage points above the 8% tariff increase originally agreed to for the year to March 2016. Nomura International economist Peter Attard Montalto said the only way to sustain Eskom was to significantly increase electricity prices in the years ahead, perhaps by as much as 20%-25%. However, political pressure would be likely to ensure price increases did not rise more than 15%. Manufacturing Circle CE Coenraad Bezuidenhout said SA’s electricity prices were relatively low by global standards, but were increasing at rates far faster than competitors such as Brazil’s. The hike announced by Nersa was “regrettable” as it would have a “severe impact” on manufacturers, already hard hit by escalating labour costs and low demand for their products. “Manufacturers will be less able to make use of beneficial factors like the weak rand to boost exports and it will undermine the economic strength of the country,” he said. COAL COAL COMPANIES - PULLING A LOT OF TRAINS (Financial Mail, 3/10/2014) Before work began on Medupi, the region had one power station, Matimba, and was focused mainly on agriculture and tourism. Though the Waterberg was for a long time known to hold about 40% of SA’s untapped coal resources, its lack of infrastructure and distance from markets made most of this uneconomic. The first and still the only company to mine coal in the Waterberg is Exxaro, whose 30-year-old Grootegeluk mine was built initially to provide metallurgical coal to what is now ArcelorMittal SA. It later expanded to provide thermal coal for Matimba. Now as Eskom — and its contractors — spend billions on the power station and surrounding services, Transnet is spending about R5bn to upgrade the rail line from Lephalale to Ermelo to carry 27Mt of coal in 2019 from 2Mt at present, and the department of water affairs is spending R2bn on upgrading the water supply through the Mokolo Crocodile West Water Augmentation Project. With better infrastructure, the Waterberg will become more feasible for both big and small coal miners. Transnet GM in the CE’s office Ali Motala told media and analysts visiting Grootegeluk mine last week that “we are committed to unlocking the Waterberg and Botswana coal reserves ... our programme is intended to enable industry to carry on with its plans and we will deliver capacity when they need it. We want industry to be bold, visionary and willing to commit.” Exxaro CE Sipho Nkosi said in August while presenting the group’s interim results that there had been a 43% increase in trains to Grootegeluk in the six months to June. Exxaro plans to grow sales from its Grootegeluk mining area, including the Thabametsi mine which is still at bankable feasibility study stage, to over 45Mt/year by 2030 from about 20Mt now. In the same period, it envisages exports growing to about 6Mt/year from about 1Mt/year, and power station sales to about 35Mt/year from about 16Mt. Analysts asked why Exxaro’s export growth projections were so modest, after the pledge made by Transnet to upgrade export capacity. Exxaro executive head: coal Mxolisi Mgojo said Exxaro was being conservative. It was confident it could bring new production on line but not about how quickly it could secure the necessary licences and permits. The group expects to spend about R16.09bn on capex over the five years to 2019, excluding the costs of Thabametsi, which are not yet finalised. Thabametsi

Transnet Freight Rail News Briefs Page 3 of 9

could support both exports and an adjacent 600MW independent coal-fired power station. The department of energy recently started the process leading to a formal bidding round for independent coal-fired power projects. Two junior coal miners are advancing plans to build mines in the Waterberg, but funding for new mines has not been easy to secure in the past few years, and they have encountered other problems. Resource Generation (Resgen) is building the Boikarabelo mine with funding from various sources, both debt and equity, and expects first production by the middle of 2016. It has had to delay start-up by six months after the earthworks contractor was put into liquidation but Transnet agreed to postpone the take or pay contract without penalty. For the first three years Resgen has contracts in place for 2.5Mt/year of export coal and will sell 3Mt/year to the domestic market. Export production is expected to more than double in the second phase of the mine’s development. Waterberg Coal Company has a memorandum of agreement with Eskom to supply 10Mt of coal a year, which it is working to convert into a coal supply agreement. Once it has the supply agreement, it expects to be able to raise project funding. It is also considering a standalone project to produce export coal, which would be financed separately. In the company’s latest market update, director Stephen Miller says discussions are under way to restructure and extend its A$35m convertible secured facility, which has a maturity date of October 9. GRAIN WHITE MAIZE CLIMBS TO 3-MONTH HIGH (Business Report, 6/10/2014) White maize advanced to the highest price in more than three months in South Africa. The white maize contract for delivery in December gained for a third day, rising 2.1 percent to 1,829 rand a metric ton by the midday close on the South African Futures Exchange in Johannesburg. That’s the highest closing price for a most-active contract since June 23. Wheat for delivery in December added 0.2 percent to 3,671 rand a ton. See article “RAIL INFRASTRUCTURE - SKETCHING THE LINES” under the heading TRANSNET TRANSNET COURT REJECTS TRANSNET S PENSION APPEAL BID (News24, 6/10/2014) Transnet's application for leave to appeal a ruling allowing their pensioners to bring a class-action suit was dismissed by the High Court in Pretoria on Friday, the FF Plus said. "Judge [Ephraim] Makgoba clearly stated that according to him there are no grounds for an appeal and he confirmed it by awarding costs against Transnet and the pension funds," spokesperson Anton Alberts said in a statement. Transnet and its two pension funds applied to the court for leave to appeal the judgment handed down in favour of the pensioners in July. On July 31, Makgoba granted an order allowing pensioners Johan Pretorius and Johan Kruger to launch a class action suit on behalf of Transnet's 62 000 impoverished pensioners, in an attempt to recover close to R80bn in assets and interest. The group has accused Transnet of stripping the Transnet Pension Fund and Transnet Second Defined Benefit Fund of its assets and mismanaging them to such an extent that the funds were unable to meet their obligations to members. They accused Transnet of attempting to dissolve the pension fund. Alberts said the FF Plus would ask Transport Minister Dipuo Peters in Parliament whether Transnet would be prepared to settle the case. "The FF Plus is delighted with the announcement that the Transnet pensioners have won another round in court in their struggle for dignified pension benefits." Transnet spokesperson Mboniso Sigonyela said they noted the high court's decision. "We will comment once we have studied the judgment," he said. RAIL INFRASTRUCTURE - SKETCHING THE LINES (Financial Mail, 3/10/2014) Rail track and locomotive projects will alter the flow of goods and people The lack of skills and empowered rail authorities has limited the integration of rail infrastructure in Africa, and this has made it more difficult and expensive to transport goods and people. State-owned logistics company Transnet — the biggest on the continent — has big rail ambitions but few regional partners, limiting the development of new infrastructure. However, a Maputo-based regional command and co-operation centre has yielded great gains for Transnet, and the company wants to extend the model to the rest of the continent. The joint operating centre, a partnership between Transnet, Swaziland Railway Authority and Mozambique’s port and rail regulators, has resulted in the near doubling of shipments to Mozambique’s port. Transnet Freight Rail’s SA to Mozambique volumes have increased to 4,5Mt, from 2,6Mt, Transnet says. The number of trains that carry exports to the Maputo port has increased to 42 a week, up from 17 trains before the establishment of the centre. Transnet mainly moves coal, magnetite, ferrochrome and chrome from SA to Maputo, and the land-locked Swaziland exports sugar and iron ore

Transnet Freight Rail News Briefs Page 4 of 9

through Maputo. SA’s rail network accounts for about 80% of that of the entire continent. This indicates the opportunities for logistics companies. The continent requires about US$50bn — estimated by Standard Bank — to develop 4 000km of additional rail infrastructure. Transnet may not have state-owned competitors, but it is not the only SA-based logistics company with continental ambitions. Grindrod, a JSE-listed freight and logistics company, has a number of ongoing rail infrastructure projects that give it a head start. Its subsidiary, Grindrod Mauritius, and Zambia’s Northwest Rail Company plan to build, operate and maintain a new 590km railway from the Zambian copper belt to the Angolan border, at a cost of about $1bn. Grindrod already has a locomotive manufacturing plant in Pretoria, which supplies rail and mining companies across the continent. It’s a dream that Transnet, too, is working to realise. Grindrod has also amassed a strategic advantage in its supply of locomotives. The company can provide locomotive maintenance in its country of operation. For example, in Sierra Leone, Grindrod was able to ensure 95% availability of rolling stock, despite a remote location and staff made up predominantly of expatriates. Transnet has invested heavily in procuring diesel and electric locomotives for SA. But it is also developing its own locomotive, which it hopes to sell in Africa. Transnet has ambitions to become an original equipment manufacturer of locomotives, positioning itself as a future competitor to companies like General Electric and Bombardier. However, transport economist Roelof Botha, an adviser to professional services firm PwC, says Transnet needs to invest in lowering transport costs for agriculture and industry in SA before venturing into the rest of the continent. “There has been an enormous structural shift in SA from rail to road. And that is because Transnet has not adequately invested in freight rail infrastructure for agriculture and industry,” says Botha. “Transnet can’t even get it right in SA. They have underspent on capital infrastructure and failed to keep up with economic growth.” Still, Transnet wants to introduce rail operating centres elsewhere in Southern Africa and then even further afield. It is now adding the control of integrated freight operations to the list of African conquests. See article “COAL COMPANIES - PULLING A LOT OF TRAINS” under heading COAL CURRENCIES AND PRICES

ALSI: 3 month to 3 Oct 14

Transnet Freight Rail News Briefs Page 5 of 9

(Mail & Guardian, 6/10/2014)

JSE AS AT 17:00PM 3 OCTOBER 2014

All Share Index 3/10 48,613

+ 424.13 + 0.88%

Industrials Index 3/10 45,090

+ 373.62 + 0.84%

Financials Index 3/10 36,870

+ 245.37 + 0.67%

Top 40 Index 3/10 43,384

+ 426.84 + 0.99%

Industrial 25 Index 3/10 58,032

+ 985.25 + 1.73%

Financial 15 Index 3/10 14,096

+ 122.17 + 0.87%

Resources 10 Index 3/10 50,371

- 269.91 - 0.53%

Alt-X Index 3/10 1,299

- 3.24 - 0.25%

WORLD INDICATORS

FOREX

Rand/Dollar 06:33 11.3153

+ 0.13 + 1.19%

Rand/Pound

06:40 18.0470

+ 0.02 + 0.12%

Rand/Euro 06:40 14.1585

- 0.009 - 0.06%

COMMODITIES

Gold (usd/oz) 06:30 1,189.02

- 26.28 - 2.16%

Platinum (usd/oz)

06:30 1,199.25

- 49.75 - 3.98%

Brent (usd/barrel) 06:33 91.98

- 1.44 - 1.54%

WORLD MARKETS

Wall St (DJIA) 3/10 17,010

+ 208.64 + 1.24%

Germany (DAX)

2/10 9,196

- 278.62 - 2.94%

Japan (Nikkei) 06:36 15,929

+ 220.80 + 1.41%

(Business Report, 6/10/2014) COPPER A – SETTLEMENT PRICE – 6665 FORWARD RATES - Dollar/rand 4pm close: R11, 3737

Transnet Freight Rail News Briefs Page 6 of 9

Transnet Freight Rail News Briefs Page 7 of 9

Petrol/ Diesel Price

YR2014

01-Jan-

14

05-Feb-

14

05-Mar-

14

02-Apr-

14

07-May-

14

04-Jun-

14

02-Jul-

14

06-Aug-

14

03-Sep-

14

01-Oct-

14

05-Nov-

14

03-Dec-

14

COASTAL

95 LRP (c/l) 1320.00 1359.00 1395.00 1398.00 1383.00 1361.00 1392.00 1392.00 1325.00 1320.00

95 ULP (c/l) 1320.00 1359.00 1395.00 1398.00 1383.00 1361.00 1392.00 1392.00 1325.00 1320.00

Diesel 0.05% (c/l) 1260.55 1284.75 1311.95 1299.15 1269.37 1245.79 1259.79 1254.17 1228.79 1215.79

Diesel 0.005% (c/l) 1263.95 1288.15 1316.35 1304.55 1274.77 1249.19 1263.19 1258.57 1234.19 1221.19

Illuminating Paraffin (c/l) 963.828 975.828 991.828 953.028 934.028 924.028 947.028 940.028 921.028 907.028

Liquefied Petroleum Gas

(c/kg) 2260.00 2314.00 2372.00 2350.00 2346.00 2319.00 2377.00 2365.00 2257.00 2269.00

GAUTENG

93 LRP (c/l) 1336.00 1375.00 1411.00 1416.00 1401.00 1379.00 1408.00 1408.00 1341.00 1343.00

93 ULP (c/l) 1336.00 1375.00 1411.00 1416.00 1401.00 1379.00 1408.00 1408.00 1341.00 1343.00

95 ULP (c/l) 1357.00 1396.00 1432.00 1439.00 1424.00 1402.00 1433.00 1433.00 1366.00 1361.00

Diesel 0.05% (c/l) 1287.15 1311.35 1338.55 1329.75 1299.97 1276.39 1290.39 1284.77 1259.39 1246.39

Diesel 0.005% (c/l) 1290.55 1314.75 1342.95 1335.15 1305.37 1279.79 1293.79 1289.17 1264.79 1251.79

Illuminating Paraffin (c/l) 1009.728 1021.728 1037.728 1003.228 984.228 974.228 997.228 990.228 971.228 957.228

Liquefied Petroleum Gas

(c/kg) 2442.00 2496.00 2554.00 2532.00 2528.00 2501.00 2559.00 2547.00 2439.00 2451.00

YR2013

02-Jan-

13

06-Feb-

13

06-Mar-

13

03-Apr-

13

01-May-

13

05-Jun-

13

03-Jul-

13

07-Aug-

13

04-Sep-

13

02-Oct-

13

06-Nov-

13

04-Dec-

13

COASTAL

95 LRP (c/l) 1151.00 1192.00 1273.00 1283.00 1210.00 1202.00 1286.00 1318.00 1313.00 1293.00 1265.00 1282.00

95 ULP (c/l) 1151.00 1192.00 1273.00 1283.00 1210.00 1202.00 1286.00 1318.00 1313.00 1293.00 1265.00 1282.00

Diesel 0.05% (c/l) 1086.67 1104.47 1162.85 1170.01 1114.45 1110.47 1188.67 1221.63 1235.45 1233.45 1218.25 1228.37

Diesel 0.005% (c/l) 1091.07 1108.87 1167.25 1175.41 1118.85 1114.87 1193.07 1226.03 1240.85 1238.85 1221.65 1231.77

Illuminating Paraffin (c/l) 807.128 833.128 890.128 860.328 802.328 803.328 878.328 903.328 928.328 924.328 908.328 924.828

Liquefied Petroleum Gas

(c/kg) 2047.00 2120.00 2238.00 2183.00 2102.00 2107.00 2236.00 2258.00 2267.00 2227.00 2186.00 2204.00

GAUTENG

93 LRP (c/l) 1165.00 1206.00 1287.00 1297.00 1224.00 1216.00 1300.00 1332.00 1327.00 1308.00 1280.00 1297.00

93 ULP (c/l) 1165.00 1206.00 1287.00 1297.00 1224.00 1216.00 1300.00 1332.00 1327.00 1308.00 1280.00 1297.00

95 ULP (c/l) 1186.00 1227.00 1308.00 1320.00 1247.00 1239.00 1323.00 1355.00 1350.00 1330.00 1302.00 1319.00

Diesel 0.05% (c/l) 1111.37 1129.17 1187.55 1196.61 1141.05 1137.07 1215.27 1248.23 1262.05 1260.05 1244.85 1254.97

Diesel 0.005% (c/l) 1115.77 1133.57 1191.95 1202.01 1145.45 1141.47 1219.67 1252.63 1267.45 1265.45 1248.25 1258.37

Transnet Freight Rail News Briefs Page 8 of 9

Illuminating Paraffin (c/l) 849.028 875.028 932.028 906.228 848.228 849.228 924.228 949.228 974.228 970.228 954.228 970.728

Liquefied Petroleum Gas

(c/kg) 2229.00 2302.00 2420.00 2365.00 2284.00 2289.00 2418.00 2440.00 2449.00 2409.00 2368.00 2386.00

(SAPIA online)

Daily prices for 3 October 2014

LME Official Prices, US$ per tonne

Contract Aluminium Alloy Aluminium Copper Lead Nickel Tin Zinc NASAAC

Cash Buyer 2050.00 1882.50 6660.00 2079.50 16265.00 20390.00 2250.00 2154.00

Cash Seller & Settlement 2060.00 1883.00 6665.00 2080.00 16270.00 20395.00 2250.50 2155.00

3-months Buyer 2065.00 1912.00 6625.00 2086.00 16305.00 20400.00 2257.00 2180.00

3-months Seller 2075.00 1913.00 6630.00 2088.00 16310.00 20450.00 2259.00 2185.00

Dec 1 Buyer 2065.00 1953.00 6575.00 2113.00 16430.00 2277.00 2215.00

Dec 1 Seller 2075.00 1958.00 6585.00 2118.00 16530.00 2282.00 2225.00

15-months Buyer 20515.00

15-months Seller 20565.00

Dec 2 Buyer 1993.00 6520.00 2133.00 16305.00 2260.00

Dec 2 Seller 1998.00 6530.00 2138.00 16405.00 2265.00

Dec 3 Buyer 2038.00 6465.00 2143.00 16180.00 2235.00

Dec 3 Seller 2043.00 6475.00 2148.00 16280.00 2240.00

(London Metal Exchange, 6/10/2014)

NOTE: Your attention is drawn to the following: 1. USE

This Newsbrief is intended for the use of Transnet employees only. It is not to be disclosed or disseminated to outside parties, without the consent of a Transnet Freight Rail Manager who is authorised to communicate with external parties. The following specific terms apply: (a) Transnet Freight Rail hereby grants permission to its employees to view the Newsbrief, and copy, print and

use any of its contents, subject to the following conditions:

(b) The Newsbrief shall be used solely for information and/or commercial purposes within Transnet only, and shall not be disseminated to any external party, copied or posted on any external network computer or broadcast in any media. Any other use, including the reproduction, modification, distribution, transmission, re-publication, display or performance in any form, of the content of the Newsbrief without written permission from Transnet, is strictly prohibited.

(c) Sale or public distribution or copying for sale or public distribution of any material in the Newsbrief is strictly prohibited.

(d) No modifications to the Newsbrief shall be made.

(e) Use for any other purpose is expressly prohibited by Transnet and may result in disciplinary action against

Transnet Freight Rail News Briefs Page 9 of 9

any transgressors, and civil and criminal action may also be taken. Violators will be prosecuted to the maximum extent possible.

2. COPYRIGHT, TRADEMARKS AND OTHER INTELLECTUAL PROPERTY RIGHTS

Copyright in the Newsbrief vests in Transnet.

(a) All content included in the Newsletter, such as text, graphics, logos, button icons, images, audio clips, software and information, is the property of Transnet or its content suppliers and protected by South African and international copyright law and all other intellectual property laws.

(b) The compilation (meaning the collection, arrangement and assembly) of all content in the Newsletter is the exclusive property of Transnet Freight Rail and protected by South African and international copyright law and all other intellectual property laws.

(c) The Transnet Freight Rail name and logo are registered trademarks of the company, protected by South African and international trademark laws and all other intellectual property laws.

(d) Note that any product, processes or service referred to in the Newsletter may be subject to other copyright, patent, trade mark or other intellectual property laws and may incorporate proprietary notices and copyright information relating to that product, process or service.