Single rail deal to Galilee Basin
On Monday, Aurizon, the former QR National, and the GVK Hancock partnership between India's GVK and Gina Rinehart's Hancock Prospecting, announced a preliminary agreement to jointly 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 that owned 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 planned coal mines in the Galilee Basin. So had billionaire Clive Palmer, who threatened to sue last year when the Queensland government gave significant project status to the rail proposals by GVK Hancock ("North-South" to Abbot Point) and Aurizon ("East-West" to Mackay).
Under this agreement, announced by Deputy Premier Jeff Seeney with the vice-chairman of GVK, G.V. Sanjay Reddy and Aurizon chief executive officer Lance Hockridge in a press conference 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 per year of coal. The rail proposal has state and federal approvals and would be open to third-party users.
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 Basin to a new terminal at Dudgeon Point.
The basin holds vast quantities of thermal coal but analysts estimate the economics do not stack up with thermal coal prices needing to rise above $US120 ($A117) a tonne. At present they are below $US100 a tonne.
But GVK corporate development executive Mudit Parashar said thermal coal market fundamentals were "very strong".
Aurizon shares closed unchanged at $4.06 on Monday, with one analyst saying the deal was still not complete and it was still "very early days".
Frequently Asked Questions about this Article…
The proposal is a single 500‑kilometre rail and port project to move coal from Queensland's undeveloped Galilee Basin to Abbot Point, including the proposed T3 coal terminal, with potential export capacity of about 60 million tonnes per year and an estimated price tag around $6 billion.
The preliminary agreement involves Aurizon (formerly QR National) and the GVK Hancock partnership (India's GVK with Gina Rinehart's Hancock Prospecting). The rail and port vehicle would be Hancock Coal Infrastructure and the two parties would jointly run it.
Aurizon would take a 51% stake in the vehicle that owns the rail and port (Hancock Coal Infrastructure) by paying an unspecified amount, while the asset would be jointly operated with GVK Hancock.
The plan is to serve the proposed T3 coal terminal at Abbot Point with capacity to export up to a potential 60 million tonnes a year, and the rail proposal would be open to third‑party users.
According to the article, the rail proposal has state and federal approvals, which is part of why the north‑south corridor to Abbot Point was advanced in the announcement.
Yes. Analysts cited in the article say the economics are questionable unless thermal coal prices rise above about US$120 a tonne, while current thermal coal prices are below US$100 a tonne—raising scepticism about justifying a roughly $6 billion spend.
Aurizon has also been negotiating separately with Adani, which bought the existing Abbot Point port for $1.8 billion in 2011 and had proposed a terminal at Dudgeon Point. Billionaire Clive Palmer had previously threatened legal action after the Queensland government gave significant project status to competing rail proposals from GVK Hancock (north‑south to Abbot Point) and Aurizon (east‑west to Mackay).
Aurizon shares closed unchanged at $4.06 on the day of the announcement, and at least one analyst cautioned the deal was not complete and it was still "very early days." GVK, meanwhile, said thermal coal market fundamentals were "very strong."
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