Waratah Coal’s China First Project, planned for the untapped Galilee Basin in Queensland, will be the largest coal mine in Australia. Its resource projections have been revised up 66% on what was announced late last year.
The $A7.45 billion ($US5.15 billion) thermal coal project will export 40 million tonnes per annum from the site near Alpha, about 1000 kilometres northwest of Brisbane.
It will include four underground longwalls and two large open pits that will produce enough coal to dwarf the biggest resource projects in the Bowen Basin.
Waratah chief executive officer Peter Lynch said it was only the beginning for the isolated expanse of the Galilee Basin.
“The Galilee Basin will be bigger than the Bowen Basin and it will get to the market before the Surat Basin does,” Lynch said. “It’s all tied up in the one deal.”
“And the [Galilee] Basin will keep expanding as the seaborne coal market grows.”
This frontier’s future has been noticed by other miners. Gina Rinehart’s Hancock Prospecting is planning its own massive project and relative newcomer Bandanna Energy is doing preliminary work for future mining at Alpha.
Those projects may be on the way to development, but the China First Project has already secured long-term coal supply contracts with Chinese government-owned buyer, the China Metallurgical Group Corporation (MCC).
The project changed from being the Galilee Coal Project to China First after MCC helped the project secure 70% of its funding; 60% through Chinese banks and another 10% in equity in the development.
The Chinese giant also holds a 20% stake in CITIC Pacific Mining’s $US3.5 billion Sino Iron project in the Pilbara in Western Australia – the country’s first major magnetite iron operation.
MCC also has arranged a take or pay contract with Waratah for 30Mtpa. This means the development will not be exposed to the usual risk associated with ambitious greenfield ventures, especially those still in planning during a global economic downturn.
Lynch said this agreement was the “big difference” between China First and other developments that might face funding hurdles during the global downturn.
“We have a very big agreement with China, so we don’t have all that much market risk,” he said.
MCC also will act as the principal contractor for China First, supplying materials and possibly sourcing machinery and equipment.
“They are responsible for procuring all the elements of the projects,” Lynch said.
“Our focus is on appropriate specifications and performance.”
The agreement, however, does not mean the regional and national mining industries will miss out. The scale of the development has grown dramatically, as has its need for workers.
The original project, when announced, was slated to produce about 16 million fewer tonnes each year and employ about 4000 at its peak.
Now there will be 6000 workers during the peak construction periods and Waratah Coal will maintain about 1500 staff when coal production begins in late 2013.
As part of the construction, Waratah will build 490km of “standard gauge” rail. That means its coal-hauling trains cannot easily transfer to the existing, mostly narrow gauge, Goonyella or Blackwater systems.
“Standard gauge provides much better operating efficiency over that distance,” Lynch said. “We have to build a new line anyhow and this way we can operate at the same level or even higher than many other mines.”
Once the venture is established, Waratah Coal may look at installing a dual-gauge rail line where it crosses the Bowen Basin and allow third-party access to the infrastructure.
To handle the workers that would build the massive rail, port and mine infrastructure, Waratah has learned from other mining projects where workers had to commute for hours at the beginning or end of a shift.
The company has also tackled the question of how to move so many workers to such a desolate part of Central Queensland, with the answer in the form of accommodation and transport facilities built onsite.
“We’re planning to have an airstrip built right next to the camp,” Lynch said.
“And if you have to build a camp, it might as well be near the project. So there won’t be that need for workers to be driving tired.”
Lynch said he would only comment generally on where services to the mine would be sourced from, saying: “With a development of this magnitude, I’m sure many will relocate closer to the site”
“I imagine there will be mining services from Mackay and Rockhampton – there are strong engineering bases there and quite a few are set up at Emerald.”
He said once built, China First would reach the 40Mt production milestone soon after. There are plans already in place to hit that rate of production by the end of the operation’s second year.
“We’re expecting to ramp up quickly,” Lynch said.
He quoted newly-released figures from the US government’s International Energy Outlook 2009 which, he said, showed how strong the electricity generation market would be for the next two decades.
The report from the Energy Information Administration projected a 49% jump in coal consumption from 2006 to 2030 (or from 127 quadrillion British thermal units in 2006 to 190 quadrillion Btu in 2030).
It also stated that “coal-fired generating capacity in China is projected to nearly triple from 2006 to 2030, and coal use in China’s industrial sector grows by nearly 60 per cent”
Lynch describes such statistics as “pretty amazing stuff”
“It’s why the Chinese are so keen to open a brand new project in a brand new area,” he said
China First has been given the “State Significance” status from the Queensland government. That status is designed to cut down on red tape and speed up the approval process for plans that would benefit the state.
The government and Waratah are working through the Environmental Impact Statement as part of the China First Project’s approval process.
“We’re keen to start construction in the second half of next year,” Lynch said.
“That’s what we’re working towards.
“We’ll be out there for a while so we’re pretty well prepared.”
Waratah also is planning further developments in the Galilee with proposed tenements for 15,250 square kilometres and inferred resources beyond 4.3 billion tonnes.
“Obviously the resource has been expanding,” Lynch said.
“We’re focused on this project here; it will keep us busy but watch this space.”
