Published on March 12, 2014
Heavy Haul Rail Conference 31st July 2013 Simon Smart Vice-President Rail Assets and Operations Development Unlocking Queensland coal reserves through the joint development of rail and port infrastructure
2 Introduction to Aurizon Global Coal Markets & Logistics Aurizon’s Galilee Solution Questions 1 2 3 4 Today’s Presentation
Introduction to Aurizon
Aurizon bulk operations Aurizon rail network Track Aurizon does not own/operate Queensland Bulk, regional freight and intermodal Queensland Coal Operations New South Wales Coal Operations North – South Intermodal East – West Intermodal Western Australia Bulk & Freight Queensland Coal Rail Network Aurizon is Australia’s largest rail freight transporter 4 *as at 1 June, 2013 • Australia’s largest rail freight hauler • Top 50 ASX-listed company • Market capitalisation of >$9 billion* • More than 100 sites across Australia • Employing more than 8000 people in hundreds of communities across Australia • We move products worth more than $50 billion in export earnings every year Aurizon:
5 • The worlds largest rail transporter of export coal from mine to port • Hauls on average >500,000 tonnes of coal each day, hauling over 180 Mtpa • Hauls 60 Mtpa of bulk minerals and commodities including Alumina, Bauxite, Nickel, across road and rail • Supply chain solutions • 18 strategically located maintenance depots across Australia • Operates the 2,670 kilometre open access Central Queensland Coal Network (CQCN) • Construction of Brownfield and Greenfield rail expansion projects • Additional network and rollingstock services • First third party haulage provider to the iron ore industry in Western Australia • Headquartered in Perth with six iron ore depots across Western Australia • Hauling near to 20 Mtpa of iron ore across 1,300km of track Aurizon operates nationally across four main business areas
6 Aurizon operates in one of the world’s largest and most complex bulk heavy-haul supply chains Central Queensland Coal Network • 145 years of experience • More than 50 coal mines • 2,700 km of common user track • 5 independently operated export terminals • Responsive to fluctuating export demand • Manages within regulated environment • Copes with extreme weather events Overview
Global Coal Markets & Logistics
Coal demand growth will be largely driven by economic growth in China and India Attractiveness of Australian Coal Source: Wood Mackenzie 2013 Despite challenging short term conditions, demand for seaborne thermal and metallurgical coal is projected to more than double by 2030 Key China India SE Asia NE Asia Europe Rest of World 2012a 2030f -22% +270% +340% +305% +6% +91% 8
9 Australia has some of the most competitive bulk commodity supply chains in the world $24 $0 $6 $36 $30 $12 $18 35 36 24 201918 12 75 2013 Metallurgical, Thermal & Iron Ore Transportation Costs – Leading Export Countries1 Australia TransportCashCost(US$pertonne–nominaldollars Source: Wood Mackenzie Cost & Margin Tool 2013, February 2013 dataset & Internal Analysis, CRU 1 Australian transport cash costs are a weighted average between Aurizon and Australian contestable and non-contestable costs
• Facing challenging global economics • Cutting costs and increasing productivity • Focussing on remaining globally competitive • Large scale and complex Greenfield and Brownfield projects • Rising capital costs in slowing markets • High Australian Dollar • Operating within highly regulated rail and port environments • Creating alignment across disaggregated supply chains • Improving operational efficiency to maximise throughput Enabling growth in the current Australian market remains challenging 10 Customers Costs Capability
Aurizon’s Galilee Solution
12 •The most advanced port development in QLD •Majority of environmental approvals secured •Realisation of rail-port efficiencies Creating one of the worlds largest co-ordinated coal development projects to unlock and sustain Galilee growth Rail Port •Combination of two advanced Galilee projects: •Central Queensland Integrated Rail Project •GVK Rail Project •Construction of multi user rail infrastructure •Innovative technologies to improve operational efficiency •Infrastructure optimisation to increase system capacity •Above and below rail innovations maximise throughput efficiency Asset Innovation Potential Aurizon/GVK Partnership
13 Taking advantage of scalable infrastructure to improve capital efficiency is the key to unlocking new basins » Connects the most advanced Galilee mines with Queensland ports » Combines Aurizon’s CQIRP with GVK Rail » Staged development aligned to mine ramp-up » Consolidate Galilee tonnes along a single corridor Proposed Aurizon and GVK Greenfield *Indicative map only – not to scale CQIRP Brownfield Upgrade GVK South to North Alignment Existing Rail Line CQIRP Greenfield LEGEND Alpha China First Kevin’s Corner Degulla Carmichael China Stone Proposed Rail Corridors RAIL » Highly scalable for future growth » Significantly reduces capital intensity » Reduces environmental and community impact CQCN Brownfield
Expanding the Brownfield CQCN is a commercially sensible solution to facilitate staged growth in the Galilee CapitalExpenditure($M) >$1bn Y5Y4Y3Y2Y1Y0 Greenfield Standard Gauge CQIRP Brownfield-Greenfield Ability to stage investment to match mine ramp-up volumes 14 Below Rail Capital Expenditure Comparison for the Galilee Basin Year RAIL
Longer Trains New Generation Rollingstock Higher Axle Loads Increased Grade Easing Signalling Technology Technology Optimisation Extracting higher value from existing assets creates extra capacity and lifts efficiency Lower unit cost/NTK Aligning Above and Below Rail Capex Reduced Infrastructure Costs Efficient use of capital Reduce Operating Costs Train lengths from 2km to 4km Increase system capacity Payloads from 10,000t to 20,000t More powerful locos Reduced number of locos per consist Increased train capacity Track upgrades from 26.5 TAL to 30 TAL Track capable of handling heavier payloads Increase grade easing Increased fuel efficiency Extending the life of assets by lowering wear and tear Latest scheduling systems Driver assist technology Trackside condition monitoring maintenance In-Cab signalling Minimises trackside signalling requirements Improved communication systems 1 2 3 4 5 6 INNOVATION 15
Aurizon’s Galilee solution will provide projects with a lower unit cost across a range of production ramp-ups and peak tonnages 16 Payloads from 10,000t to 20,000t Tonne Axle Loads from 26.5 TAL to 30 TAL Technology Optimisation Source: Aurizon Team Analysis 906030 CQIRP Brownfield-Greenfield Greenfield Standard Gauge Target Throughput (Mtpa) UnitCost/Tonne Note: Key variables ramp-up profile, discount rate Indicative Rail Unit Cost Comparison for the Galilee Basin New Generation Rollingstock Key Aspects of Aurizon Solution INNOVATION Increased Grade Easings Train lengths from 2km to 4km (Double Goonyella length)
The Port of Abbot Point represents enormous opportunity for the Bowen and Galilee Basins The Abbot Point Opportunity » Staged development of coal, minerals and freight terminal infrastructure » Deep water access and scalable footprint » Alignment of rail investment and operations » Proposed Aurizon and GVK joint development of 60mtpa Terminal (T3) » Aurizon and Lend Lease Join Proposal: NorthHub Consortium » NorthHub announced as a Preferred Proponent for AP-X development (T4) 17 Updated map from Ruby6 Queensland Ports T3 Port T4 Port PORT
Coordination across the supply chain provides opportunity to maximise value returns for all proponents Align capital management ALIGNED SUPPLY CHAIN OPERATING MODEL 18 Integrate planning & scheduling Align contractual obligations Optimise supply chain design for effective deployment of capital Improve asset utilisation for reduced cycle times and system congestion Common incentives linked to supply chain performance to maximise throughput
Aurizon has plans to run longer trains (4km) with heavier payloads (>20,000t) enabled by a series of innovations Staged development that extracts maximum value from existing rail assets, is required to unlock this growth in Queensland Long term coal market fundamentals remain robust with demand from China and India to drive future coal growth The alignment of rail and port development and operations to Abbot Point presents an enormous opportunity for Queensland Coal that Aurizon is excited to participate in Recap 19
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