The $10 billion joint-venture between Mrs Rinehart's Hancock Prospecting and India's GVK group is the key to unlocking a vast new coal field in Queensland's Galilee Basin at a time when big miners, including Rio Tinto, Glencore Xstrata and BHP Billiton, are shelving projects or winding back production.
"We cannot afford to adopt carte blanche standard Australian practices. Australian productivity has gone south, the costs have gone north and prices have come down," GVK Hancock Coal managing director Paul Mulder said.
"The perspective of the company has to be to ensure that this project can operate even in a commodity down cycle, and it is attractive to investors even in a commodity down cycle.Yet Mr Mulder is no fan of employing foreign workers on 457 visas to cut labour costs. "It's quite clear from government policy that it costs more to employ people under a 457," he said. "You have to pay the same rate, but you also have to train them, induct them, socialise them into Australian society, so that comes at a material cost. If you are paying an Australian a base (rate) of one, with a 457 visa it's one-plus . . . you would only get a 457 person if it was necessary for finance and to get the project up and running."
As the $50bn coal industry comes under the hammer from low prices and a high dollar, forcing the scrapping of massive new coal terminals on central Queensland's Balaclava Island and in NSW's Hunter Valley, the Galilee Basin would come on line as the construction phase of Queensland's coal-seam gas industry was winding down in the second half of the decade, should any or all of the nine planned mines pan out.
The multi-billion-dollar race involves a second Indian company, Adani Mining, Clive Palmer's Waratah Coal and exploration group Bandanna Energy, all of which have projects at various stages of planning and approval. Collectively, they are worth an estimated $25bn, capable of producing 180 million tonnes of coal a year. The planned GVK Hancock development near Alpha, 1000km northwest of Brisbane, is considered the most advanced of them.
GVK Hancock has entered a non-binding agreement with rail operator Aurizon to construct a 500km link to the coal port of Abbot Point as well as new loading terminals, adopting the "pit-to-port" model from iron-ore mining in Western Australia. Development of a third mine at Alpha West, would come later.
Getting the project off the ground will test international financial markets' confidence in Australian resources and the mettle of miners to secure gains in productivity and control costs.
Mr Mulder said the business plan was to extract thermal coal -- burnt by power stations -- at a cost of $US55 ($57.5) a tonne, compared with the average cost in Queensland of about $US77 a tonne. This would put the running cost of its proposed mines in the lowest 25 per cent quartile of coal producers.
He said the joint venture's aim was to finalise construction bids by the end of the year "one for the ports, one for the rail, one for the mining infrastructure, one for the wash plant" -- and go to the market for finance early next year.
Asked to rate the prospects of the project getting up, Mr Mulder said: "We are a project that is attractive even in this current commodity downswing."
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