Steeling dreams

THREE decades after the proposal by former Queensland Premier Sir Joh Bjelke-Peterson and mining magnate Lang Hancock to build a cross-Australia railway to haul iron ore to the east and coal to the west, the idea has resurfaced.
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Staff Reporter

Just as it was then, the plan has been touted as one of Australia’s most ambitious infrastructure projects.

This time around, the trans-Australia railway plan has been put forward by a consortium called East West Line Parks, which it has called Project Iron Boomerang. The man behind it is Northern Territory businessman Shane Condon.

Condon has proposed a 3000km railway between the coal fields in the Bowen Basin and the iron ore deposits in Western Australia’s northwest, plus processing plants at either end. The railway will terminate near Yandi in northern WA and near the town of Moranbah in Queensland.

According to De-Anne Kelly, the Federal Member for the Queensland region of Dawson, the whole project will cost approximately $50 billion in 2006 terms.

In July, Kelly led a delegation from East West Line Parks to Bowen to discuss the proposal.

She said the aim of the tour was to meet community leaders and brief them on Project Iron Boomerang and what it will mean for the community. Kelly also said Project Iron Boomerang would be the largest commercial project ever undertaken in Australia, with the supply chain savings alone worth up to $2 billion per year on what investors see as the transport savings available on 44 million tonnes of hard resources.

“Currently, coal mined in Queensland for export is railed to port and unloaded. It is loaded into ships and unloaded at its destination,” Kelly said in a statement. “And again – particularly in China where most steel plants are inland – there is another significant rail journey to get what is a bulky raw material to its end user. The same goes for WA iron ore.

“This is an innovative project and would be the equivalent of a modern-day Snowy Mountain Scheme.”

Condon told media that when trains run empty in the Pilbara or the coal fields of Queensland, and empty ships are coming back from China, the return trip for these giant empty conveyances is 45% of the total trip cost, which is highly inefficient in terms of both time and fuel.

If the project does get the go-ahead, Condon said he expects the first pig iron to be produced from as early 2011.

Considering he expects the project approvals to be granted at the end of 2007, that is fast. If all goes to plan, six blast furnaces will be built at either end of the proposed railway between 2007 and 2011.

Despite numerous attempts, Australia’s Mining Monthly was unable contact Condon directly, but he did tell Queensland’s Courier-Mail newspaper there was one important difference between the Iron Boomerang plan and the Bjelke-Peterson-Hancock dream.

He told the paper the Bjelke-Peterson-Hancock dream failed because they were thinking of steel for local consumption, whereas his plan is global and he believes international steelmakers will jump at the chance to be part of Iron Boomerang.

However, Condon did concede that his railway would go nowhere unless the proposed steel plants were built at the same time.

He is looking for 12-15 global partners and in May, gave presentations to major steelmakers in Beijing, Seoul and Tokyo.

He told the Queensland paper all but one of the steel producers he has spoken to so far have asked to receive invitations to join the project.

The ANZ bank’s chief economist, Saul Eslake, is one of the project’s more prominent supporters.

Eslake told AMM he has a small personal interest in the project, having originally been asked by Condon to give him (unpaid) media and political advice on the project. Eslake also has a small financial interest in the project.

Despite this, he said these interests did not influence what he said about the project.

“At this stage, nothing has been approved by any government,” Eslake said. “What has occurred is that Shane Condon and some of the other proponents have had serious discussions with the investment promotion agency of the federal government, Invest Australia.

“Similar discussions have been had with the Queensland, Western Australian and Northern Territory governments around issues like planning, the extent of government support and surveying.

“But I’m not aware that government officials or departments have made any commitments to support the project rhetorically or in any other way.

“No government equity support is being sought for this – it’s not like the Alice Springs to Darwin railway, and if it was, I wouldn’t have anything to do with it, frankly – but the working assumption is that the equity in it can come from those who believe they make money out of it.”

Eslake said it would need debt finance as well, but not necessarily from governments. He said the equity providers could include the railway operators, those moving coal or iron ore or steelmakers at either end of the railway.

“The belief is that there will be sufficient equity interest in it for there not to be any requirement for government equity participation,” Eslake said. “But it may be necessary and/or appropriate for some kind of government support to be given for borrowings to fund the debt component.

“But the consortium won’t know that until they’ve had more detailed conversations with bankers.”

However, Eslake said the amount of debt that was needed would depend on how much equity could be raised.

Interestingly, he also said the railway would be attractive to China and Japan for environmental reasons.

“China, although it’s obviously not part of the Kyoto protocol, and hasn’t made any commitments about greenhouse gas emissions, nonetheless does have some serious problems in this regard.

“A lot of the coal they burn has a high sulphur content and creates acid rain. And of course it might be the straight economics. Part of the cost of making steel is getting coal and iron ore up to your mill, and it could be that there are advantages for those companies in doing it in Australia.”

Bowen mayor Mike Brunker told AMM that one of the most attractive aspects of Project Iron Boomerang was that with funding coming from its users, it did not need huge funding from state and federal governments in order to be viable.

“I think they’re doing the right thing by not wanting one steel company to control the whole lot,” Brunker said. “They want 12 or 15 of the biggest steel companies.”

“It’s such a worthy project, it might create the feeling [among steel and iron ore producers] of ‘If we’re not in this, we could miss out’,” Brunker said. “If it does get up, it’s going to change the way steel is produced and the cost of it.

“I see [one of] the benefits being keeping the jobs in Australia, not shipping the resources off overseas for somebody else to get the benefit.

“We’re a big country and we need to look after our own and send the ships out with steel in them.”

Australia’s Mining Monthly

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