Rolleston given go-ahead

XSTRATA yesterday announced that the $291 million open-cut Rolleston project it inherited from MIM had won board approval to proceed.

Staff Reporter

The project, 75% Xstrata-owned with partners Sumitomo and Itochu, each holding 12.5%, is located 275 kilometres due west of Gladstone in Queensland’s Bowen Basin.

The development means that more than a third of the company's annual coal production will eventually come from Queensland. The 20 year project is expected to produce first coal in 2005, ramping up to 8Mtpa by 2008 with further expansion possible to 12Mtpa, with minor additional capital. Rolleston has estimated Identified Coal Resources of approximately 600 million tonnes, including 173 million tonnes of Recoverable Coal Reserves. Rolleston is planned as an open cut thermal coal mine with two large draglines as the prime waste stripping machines.

The anticipated low strip ratio and production of a 100% coal product that does not require washing is expected to place Rolleston in the lowest cost quartile of Australian coal producers. Coal will be exported via the Gladstone Port providing an estimated US$1.25/tonne freight advantage.

Rolleston’s coal is characterised by its exceptionally low-ash content (around 7.5%), which has already generated substantial interest across the Asian market. As part of a comprehensive assessment of the Project, undertaken following its acquisition with the other assets of MIM in June 2003, combustion tests were conducted on coal from the Rolleston trial pit by power utilities in Korea, Japan, Hong Kong, New Zealand and Australia. Xstrata said these tests confirmed the competitive advantages of the Rolleston product, with letters of intent already received from major customers.

Commenting on the launch of the project, Mick Davis, Xstrata’s chief executive, said: “With the additional low-cost expansion capacity that sits within our New South Wales business, Xstrata has potential, after Rolleston Phase 1, to grow its Australian thermal production by over 30%, at exceptionally low capital cost and with minimal lead times, with market demand the only major consideration.”

The announcement was enthusiastically welcomed by both Queensland Resources Council ceo Susan Johnston and Queensland premier, Peter Beattie who said it was a major vote of confidence in the future of Central Queensland.

Queensland Rail will construct, own and operate a new 110km spur to expand their existing rail network in the Blackwater system, at an estimated capital cost of $230 million. The new spur will connect to the existing system near Kinrola. Rolleston mine will be charged a fee under a 20-year contract for access and use of the new line.

Peter Coates, chief executive Xstrata Coal, said the decision to go ahead followed a comprehensive six-month internal review, including a recent 50,000 tonne sample pit, which confirmed the low-ash content of Rolleston coal.

“Rolleston is an attractive, low-risk, robust project that is expected to be one of the lowest cost operations of its type in Australia, and indeed the world. Its competitive cost structure and extensive resources provide it with significant as yet unquantified upside potential that will make Rolleston a major engine of growth for our Australian coal business in the future,” Coates said.