12/11/2014 - 15:39

Aurizon cautious on iron ore project

12/11/2014 - 15:39

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Rail infrastructure company Aurizon is positive but cautious about the West Pilbara iron ore project, with chairman John Prescott saying today that, on balance, he expects the development to proceed.

Aurizon cautious on iron ore project
Aurizon managing director Lance Hockridge.

Rail infrastructure company Aurizon is positive but cautious about the West Pilbara iron ore project, with chairman John Prescott saying today that, on balance, he expects the development to proceed.

Speaking after the Brisbane-based company’s first annual meeting in Perth, Mr Prescott said Aurizon was working closely with project partners Baosteel, POSCO, and American Metals & Coal International (AMCI).

He said all parties needed to finalise their planning and evaluation of the integrated mine, rail and port project, before decisions could be taken.

“On balance, notwithstanding some headwinds, I think we will end up with a project, but I can’t guarantee it,” Mr Prescott said.

The project partners have previously said they were targeting first iron ore exports in 2017-18, but Mr Prescott was cautious on that as well.

Baosteel’s steel plant is going ahead, it’s likely they will have a real need for this ore in the immediate time frame of this project, but the world economy changes,” Mr Prescott said.

The West Pilbara project would bolster Aurizon’s WA operations, which already employ 1,000 people handling iron ore in the Mid West and freight to the east coast.

The company has established a project office in West Perth to work the West Pilbara development, with support from Parsons Brinckerhoff, Calibre and AECOM.

Managing director Lance Hockridge told journalists after the AGM that the base case for the project was iron ore production of 40 million tonnes per annum.

“The number that’s still most being looked at is 40 million tonnes,” he said.

“The challenge for us is to determine the tariff for a 40 million tonne throughput and whether that makes a return and economic sense,” Mr Hockridge said.

“Beyond that first stage, there is opportunity for growth from an API (joint venture) point of view and of course from the other currently stranded operators in that part of the world.

“We have (had) not insignificant interest from third parties who would like to get access to this infrastructure.”

Mr Hockridge said the joint venture partners were “collectively working at full speed” on the project.

Asked about the current weakness in iron ore prices, he said they were taking a “10, 20, 30-year time horizon” on the project.

Mr Hockridge said contractors are “wearing a path through the carpet in my office”.

“We’ve got every potential contractor in this space actively engaged,” he said.

Mr Hockridge said Aurizon was expecting significant reductions in contractor rates, based on its recent coal sector projects in Queensland.

“We’re also looking at whether there are smarter and better ways of doing the capital work,” he said.

It would be some time before a final decision was made, however.

“A final investment decision around this project won’t be taken, at the earliest, until the back end of calendar 2015,’’ Mr Hockridge said.

“That means significant capital would not be requited until mid-2016 and beyond.”

Aurizon joined with Baosteel this year to acquire Aquila Resources, which has a joint venture with POSCO and AMCI to develop the West Pilbara project.

The project includes new mines, a 280-kilometre railway and a deep water port at Anketell, and has previously been costed at more than $7 billion.

Aurizon’s long-term plan is to sell its stake in Aquila (the mining company) but retain a controlling stake in an infrastructure company.

 

 

 

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