Aurizon (ASX:AZJ) and GVK Hancock hav signed a non-binding term sheet to jointly progress the development of rail and port infrastructure to unlock Galilee Basin coal reserves as well as support the next phase of coal growth in the Bowen Basin.
The agreement will provide access to projects include GVK Hancock’s Alpha, Kevin’s Corner and Alpha West coal mines.
At full capacity, the proposed arrangement is intended to provide sufficient equity and debt funding for the projects to reach financial close.
Aurizon and GVK Hancock are seeking a development of a potential 60 million tonnes per annum port and rail project that would underpin the opening of reserves in the Galilee Basin and continued growth of the Bowen Basin.
Collectively, it could represent an investment for Queensland in the order of $6 billion.
Aurizon and GVK Hancock would jointly manage the proposed rail and port projects.
These projects comprise a greenfield rail project and a development right for a coal terminal at Abbot Point.
GVK Hancock received the primary State and Commonwealth environmental approvals for its greenfield rail project in May and August 2012 respectively while GVK Hancock’s port project received Commonwealth environmental approval in October 2012.
Following completion of the transaction, Aurizon would gain the rights to operate and jointly manage with GVK the rail infrastructure and to exclusively provide above rail haulage from GVK Hancock’s Alpha and Kevin’s Corner mines for up to 60mtpa of coal.
Aurizon and GVK Hancock would also jointly determine the optimum rail solution that may include a combination of GVK Hancock’s rail project and Aurizon’s Central Queensland Integrated Rail Project that would ultimately connect with the proposed T3 coal terminal at Abbot Point.
Completion of the proposed transaction, including the upfront consideration from Aurizon, would be subject a number of conditions fulfilled including satisfactory due diligence, final Board approvals, third party approvals and negotiation of final terms and definitive documentation.
In addition to new mines, six companies have announced major expansion projects – BHP Billiton, Rio Tinto, Anglo, Vale, Xstrata and Peabody.
The Galilee Basin is poised to create 25,000 new jobs with new mines being developed by Hancock Coal, Waratah Coal, Adani, and several other companies – and a major expansion of the Abbot Point export terminal and associated infrastructure.
Other advanced coal projects include Carmichael Coal Mine and Rail project by Adani Mining, Waratah Coal's Galilee coal project and Alpha Coal Management's South Galilee project.
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