The long-mooted transaction between GVK and Rinehart’s private company Hancock Coal came in lower than earlier expectations of $2.25 billion but significant rail investment is needed to commercialise opportunities in this unexploited coal region.
Under the deal announced on Friday, GVK will acquire a 79% stake in Hancock’s flagship Alpha and Alpha West projects, 100% of Hancock’s nearby Kevin’s Corner project and all of Hancock’s associated rail and port commitments.
Hancock said the transaction was expected to be completed in two weeks, with $500 million payable at closing.
GVK is expected to pay another $200 billion one year from this time and a further $560 billion on the financial closing of the coal projects, expected by 2012.
GVK said the three coal projects were expected to supply a total of 84 million tonnes per annum, with first exports of 30Mtpa expected to start in 2014.
The projects are all planned to export through Abbot Point and GVK said it would retain some port capacity there for Hancock Coal, which will still have a 21% share in the Alpha and Alpha West projects.
Indian billionaire GV Krishna Reddy, who controls the GVK group, said he was extremely excited about closing the transaction with Rinehart.
“In the last few years Mrs Rinehart has developed these projects to the advanced stage that they are in today, which speaks volumes about her capacity and capability to develop large and complex projects,” Reddy said.
“These are truly world class coal assets in both quality and scale and we look forward to the opportunity of jointly developing these projects to their full potential.”
The Galilee Basin is emerging as a centre of Asian investment in Australian coal, with the Indian Adani group developing the Carmichael project and Clive Palmer’s China First project being bankrolled by the Chinese.
There are three well-known plans to build rail lines of around 500km each to link projects in the undeveloped basin to export through Abbot Point.
These include a rail line for the Carmichael project, targeting 60 million tonnes per annum, and another for the up to 60Mtpa anticipated from Hancock’s projects.
Palmer is behind a separate rail proposal to link the up to 40Mtpa China First project shared by his company Waratah Coal and Metallurgical Corporation of China.
While Hancock’s Alpha and Alpha West projects, also known as the Tad’s Corner and Paul’s Corner projects, are based on open cut mining, the Kevin’s Corner project is based on three longwall operations and one open cut.
According to Hancock’s earlier development timelines, the first longwall for Kevin’s corner aims to produce 4.4Mt of thermal coal in 2015, with a further expansion to 13Mt in 2016, 16.1Mt in 2017, 22Mt in 2018, 36.5Mt in 2019 and 28.3Mt in 2020.