Galilee Basin 'milestone'

RAIL operator Aurizon is closer to an agreement to acquire a 51% stake of the estimated $A6 billion rail and port development needed to commercialise GVK Hancock’s vast coal projects in Queensland’s Galilee Basin.
Galilee Basin 'milestone' Galilee Basin 'milestone' Galilee Basin 'milestone' Galilee Basin 'milestone' Galilee Basin 'milestone'

Proposed rail solution for the Galilee Basin. Map courtesy of Aurizon.

Blair Price

Previously raised in March, Aurizon said further progress was made over the last few months, including alignment on commercial terms.

“The proposed rail solution means that for an initial stage, only 300km of the 500km of new corridor and track under the original GVK Hancock proposal will be constructed before connecting into existing Aurizon [rail] infrastructure,” Aurizon said.

“This will also allow a phased development at the Abbot Point T3 terminal to match volumes and ramp up, thereby materially reducing the initial cost of infrastructure.

“Under the proposal, the southern rail connection would be built to narrow-gauge specification to carry trains of up to 25,000 tonnes, with the option to consider an expansion to a full greenfield line (narrow or standard gauge) if increased tonnages later justify the additional investment.”

The Queensland government’s aims to discount the royalty rates faced by projects in the undeveloped Galilee Basin for an undisclosed “initial period” may have assisted the pace of the talks.

“We can see from our assessment that GVK Hancock’s coal assets are very well advanced,” Aurizon managing director and CEO Lance Hockridge said.

“We’re pleased this also aligns with government objectives – getting early tonnes out of the Galilee at lower cost by tapping into existing infrastructure and consolidating tonnages onto a common corridor.”

“This work not only brings us a step closer to jointly providing the primary rail and port solution for the Galilee, it brings the whole region a step closer to realising the benefits of one of the largest regional development opportunities this state has seen for decades.”

While no binding agreement is reached with due diligence underway, GVK vice-chairman Sanjay Reddy said a major milestone was reached.

“The teams from both sides have demonstrated a commitment to bring this project to reality and have worked well together,” he said.

“We now look forward to the next few months as we work on the detailed documentation and start to execute our common plan to build and develop this infrastructure.”

Aurizon flagged that the proposed rail and port development would create more than 1300 construction jobs and 300 long-term operational jobs.

GVK Hancock’s coal projects in the basin include the $4.2 billion Kevin’s Corner project, which received federal environmental approval at the start of this month, plus its $6 billion Alpha and expansion option Alpha West projects.

While the Alpha project already has regulatory approvals, it is still subject to a challenge in the Queensland Land Court.

When combined, GVK’s three projects could create one of the largest coal mining operations in the world, holding total resources of 8 billion tonnes and peak capacity of about 80 million tonnes per annum.

The projects are expected to provide about 7000 jobs during construction and about 20,000 once the mix of open cut and longwall operations start up.

The company was formed after Indian conglomerate GVK acquired a 100% stake in the Kevin’s Corner project in Queensland from iron ore figure Gina Rinehart’s Hancock Prospecting and a 79% stake in the Alpha Coal and Alpha West Coal projects in late 2011.

Federal MP and Galilee Basin rival Clive Palmer previously claimed that GVK Hancock received favourable treatment from the Queensland government.

Palmer’s Waratah Coal leads the vast $6.4 billion China First coal project in the region with considerable Chinese backing.

His opposition to Queensland Premier Campbell Newman has been credited to a state government decision to not advance the China First project’s railway plans.

Newman previously said the six different Galilee Basin railway proposals that progressed under the previous Labor government were unacceptable.

Other big coal projects in the region include AMCI and Bandanna Energy’s South Galilee project, Vale’s Degulla project – which was reportedly on the market mid-year – and Indian conglomerate Adani’s Carmichael project.