Pacific's coup in Queensland

ASCIANO subsidiary Pacific National has landed a milestone haulage contract with BHP Mitsui Coal, chalking up a big win against Queensland Rail National in its home state.
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Pacific National coal train.

Blair Price

Under the long term, take or pay contract Pacific National will haul up to 4.2 million tonnes per annum through the northern missing link project that will connect the Newlands and Goonyella rail systems.

The northern missing link, or Goonyella to Abbot Point Expansion (GAPE) project, is expected to be complete in early 2012 and the haulage contract will start on the first day of 2013.

Asciano chief executive officer John Mullen was “extremely pleased” with the contract win and said it would reinforce the company’s ability to deliver on its Queensland coal strategy.

“Asciano is offering an innovative and flexible rail haulage approach,” he said.

“A key objective was to maximise the opportunity for tonnage through the newly expanded port of Abbot Point. The result is an innovative operational solution and contract that drives the efficient behaviour of both rail and coal operator.

“Winning this contract with such a major coal producer is a coup for our growth aspirations into the key expansion Port of Abbot Point, and the two diesel powered trains to support the BHP Billiton task will be maintained at our recently announced Nebo heavy maintenance facility.”

The mines involved were not revealed in Asciano’s announcement, but analysts from

Macquarie Private Wealth took a punt.

“We believe the contract is for Poitrel and South Walker Creek, with the residual volume still being hauled by QRN,” MPW said in a report.

The analysts added the contract win raised the question on whether BHP Billiton Mitsubishi Alliance’s new Daunia mine, due to open in 2013, had been contracted for or whether BMC subcontracted “existing volume to BMA”

“The critical element of the contract is not the volume in itself, but winning volume with BHP,” MPW said.

“BHP’s current volume split is around 95% QRN and 5% Asciano. We would anticipate this split will shift to being a little more balanced as BHP encourages competition.”

MPW forecast that Asciano had scope of another 20Mt of haulage contract growth with BHP in Queensland over the next five years, and “arguably 4-5Mt” in New South Wales.

The analysts said there was still around 20Mt of GAPE capacity and they expect another 30Mt of Wiggins Island haulage volumes to be contracted in the next 12 months.

“Within GAPE, Rio Tinto is 4-8Mt and QCoal is 10Mt. These are the last major contracts.”

Noting that Rio favours Pacific National over QRN in the state, MPW has maintained an outperform recommendation on Asciano stock.

Asciano shares are down 3.5c to $1.51 this morning.

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