Indian company Lanco Infratech has released details of the planned expansion of its Griffin Coal business, in which it will invest an estimated $1.2 billion to underpin annual exports of 12 million tonnes starting in just three years.
Today’s announcement indicates that Lanco is keen to move on from the regulatory and funding issues that had threatened to derail its ambitious expansion.
Executive general manager project development David Trench said Lanco was planning a two-stage expansion.
Speaking at the Energy in Western Australia conference, he said the first phase would see it export 1.25mt per annum of Collie coal from Bunbury using containers.
The second much larger project would see 1 kilometre-long trains carrying coal to upgraded export facilities at Bunbury port.
Lanco, which paid $750 million for the Griffin Coal business last year, has made no secret of its desire to start exporting Collie coal.
However, its desire to focus on export opportunities, and attempts to reprice its domestic sales contracts, led to Premier Colin Barnett threatening to withhold an export licence.
Lanco has also become enmeshed in a complex legal dispute with Perdaman Chemicals & Fertilisers, which had been planning to use Griffin’s coal in a $3.5 billion urea project at Collie.
In addition, uncertainty about the pricing of Griffin’s coal supplies has stopped insolvency firm KordaMentha completing the $1.2 billion sale of the coal-fired Bluewaters power stations at Collie.
The coal mine and power stations had been part of Perth tycoon Ric Stowe’s expansive business empire, which was placed in administration in January 2010.
Despite all of these issues, Lanco is pressing ahead with its growth plans.
Mr Trench said Griffin’s traditional customers, including Verve Energy, Worsley Alumina and Iluka Resources, underpinned annual coal sales of 3mtpa, but offered little growth.
Therefore Lanco, which has a large coal mining and power generation business in India, was looking further afield.
“Contrary to popular belief, Lanco did not buy Griffin for coal to export to India,” Mr Trench said.
“We actually bought it for the seaborne market to take it to other parts of the world.
“Thinking outside the box, there is another market for Collie coal, and that is any other seaborne port,” he said in reference to a slide showing Western Australia’s ports.”
Mr Trench said the concept of shipping coal to the Pilbara, as a fuel for new power stations, “might sound a little crazy” but argued that coal would be price competitive with gas.
“I could supply coal to anywhere in Western Australia for $4.52 a gigajoule; compared to the open market for gas……that makes it very attractive.”`
Lanco’s initial expansion would see the company load containers with coal and transport them to Bunbury on the existing rail line.
Mr Trench described this as a “completely enclosed delivery system”, with the containers being opened only when they are in the ship’s hull.
This project would run for about four years and involve 730 train movements and 29 ship movements a year from Bunbury’s berth 5.
Its longer term plan involves three major projects: expansion of the mine’s production capacity to 20mtpa at a cost of $300-$600 million; development of Bunbury’s berth 14A at a cost of $350-$550 million; and upgrading of the rail link at a cost of $150-$250 million.
Mr Trench said Lanco was planning to upgrade the berth’s capacity to 15mtpa but Lanco itself was planning to export 10-12mtpa, leaving some capacity for other port users.
The port infrastructure would include underground discharge of the sealed rail wagons, and covered storage sheds and conveyors.
Lanco has signed a heads of agreement with the Bunbury Port Authority and is in the process of finalising its environmental review documents.
Despite the many steps ahead, Mr Trench said Lanco expected to be export ready by mid to late 2015.
