Galilee Basin rail plan closer

A single rail solution is emerging to get coal from Queensland's undeveloped Galilee Basin to port at Abbot Point, but there is scepticism that the $6 billion outlay can be justified, given soft coal markets.

A single rail solution is emerging to get coal from Queensland's undeveloped Galilee Basin to port at Abbot Point, but there is scepticism that the $6 billion outlay can be justified, given soft coal markets.

Aurizon, the former QR National, and the GVK Hancock partnership between India's GVK and Gina Rinehart's Hancock Prospecting have announced a preliminary agreement to develop the 500-kilometre rail and port - potentially the most expensive infrastructure project in the state's history.

Aurizon would pay an unspecified amount to take a 51 per cent stake in the vehicle owning the rail and port, Hancock Coal Infrastructure, which would be jointly run.

Aurizon, GVK Hancock - developing the Alpha, Kevin's Corner and Alpha West mines - and Indian rival Adani had each proposed rail corridors to unlock coalmines in the basin. So had billionaire Clive Palmer, who threatened to sue last year when the state government gave significant project status to the rail proposals by GVK Hancock (so-called "North-South" to Abbot Point) and Aurizon ("East-West" to Mackay).

Under this agreement, announced by Deputy Premier Jeff Seeney with GVK vice-chairman G.V. Sanjay Reddy and Aurizon CEO Lance Hockridge on Monday, the two companies would work together on the north-south corridor to develop a rail line from the Galilee Basin to Abbot Point and the proposed T3 coal terminal, with the capacity to export a potential 60 million tonnes a year of coal.

Aurizon is in separate negotiations with Adani, which bought the existing port at Abbot Point for $1.8 billion in 2011, but was proposing to take coal from the Galilee to a new terminal at Dudgeon Point.

The Galilee Basin holds vast quantities of thermal coal but analysts say the economics do not stack up unless thermal coal prices rise above $US120 a tonne. They are presently below $US100 a tonne.

But GVK corporate development executive Mudit Parashar said thermal coal market fundamentals were "very strong".

"We are very close to the key utilities and trading houses in Asia and have a good sense of future thermal coal demand," he said. "We see a supply deficit in the next five to seven years and this will be aggravated by the lack of high-quality, low-cost assets coming onstream and limited by infrastructure constraints."

Aurizon shares closed unchanged at $4.06 on Monday.

Last month the chairman of miner Coal India, S.Narsing Rao, told Bloomberg a 327-kilometre rail network under construction in India would free up 300 million tonnes of untapped coal annually and "eliminate the need for imports of thermal coal in five years".

A GVK Hancock spokeswoman said coal from Alpha was not primarily destined for India.

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