Detailed in the prospectus for its August float, Aston expects to hit saleable coal production of 10.8Mtpa from 2014 onwards.

The Maules Creek open cut project in the Gunnedah Basin of New South Wales sits about 16 kilometres from the nearest main rail line, while Newcastle’s port is 380km away.

RBS noted in a recent report that Port Waratah Coal Services was due to announce 2012 allocations on December 1.

With Aston’s first coal expected in 2012, RBS expects the company to get a small allocation from the port operator which will lift confidence in the Maules Creek project.

But the broker also believes that Aston will need to secure PWCS spot allocations in order to reach its ramp-up targets.

While the Terminal 4 project could cater to Maules Creek’s production, it is not expected to be ready until 2016 “at best”

RBS consequently expects Aston to “actively negotiate possible arrangements” with other coal producers that cannot meet their take-or-pay obligations, or to strike deals with producers which want to blend relatively high-ash Hunter Valley coal with the low-ash Maules Creek coal.

Even on the basis that Aston secures spot allocations from other parties, RBS does not expect Maules Creek to ramp up to 10.8Mtpa until 2015.

Mines versus port expansions

Interestingly, RBS said it had used Aston’s assistance along with third-party consultants and traders to assess which planned mine expansions might not match planned capacity expansions at Newcastle.

On the bigger “swing factors in the supply balance”, RBS questioned how close Coal & Allied could get to its 42Mtpa output target by 2015.

The broker said this target relied heavily on the development of its Mount Pleasant project, while its mines were operating at about 17% below a nominal capacity of 30Mtpa.

Other swing factors included whether Xstrata Coal could hit 10Mtpa from its Ravensworth North open cut from 2013, and whether Yancoal Australia reaches 12Mtpa from its Moolarben mine.

The other unresolved question was the amount of domestic production Centennial Coal acquirer Banpu could ship into export markets.

This modelling led RBS to forecast there will be a “comfortable surplus” of Newcastle port capacity for Aston’s requirements, including the ramp-up from 2012.

On the rail side of the equation, RBS noted that the Australian Rail Track Corporation was in phase 2 of a five-phase process to duplicate the existing rail through the Gunnedah Basin to Newcastle, expected to cost $185 million.

A funding solution is expected to be struck in early 2011, while the staged construction is anticipated to allow Aston and other players in the region to start increasing coal exports from 2013.

RBS set a target price on Aston of $7.70 per share.

The broker expects Aston shares to lift on gaining a small PWCS port allocation next month, and from possibly selling a stake of the Maules Creek project to Japan’s Itochu Corporation this quarter.

RBS anticipates various Maules Creek development milestones to be reached in the March quarter, including the appointment of a mining contractor.

Aston shares closed up 8c to $6.98 yesterday.