Single rail deal to Galilee Basin

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 spend can be justified, given soft coal markets.

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".