OZ minerals eyes rail connection to BHP Billiton's Olympic Dam mine in South Australia

 
Topic moved from News by dthead on 14 Mar 2015 20:29
  LancedDendrite Chief Commissioner

Location: North Haverbrook; where the monorail is king!
BHP Billiton could yet play a role in the development of OZ Minerals' Carrapateena mine in South Australia, with OZ suggesting the economics of a crucial rail link to the project would be helped if BHP's Olympic Dam mine were tied in.

Olympic Dam lies between OZ's only operating mine, Prominent Hill, and its best development option, Carrapateena, and with the South Australian government investigating whether it can help OZ build a rail link between its two assets, Olympic Dam is fast becoming part of the conversation.
OZ minerals eyes rail connection to BHP Billiton's Olympic Dam mine in South Australia


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In another world, GWA, the various above-rail freight operators or even the ARTC would be crawling all over this kind of business opportunity. Olympic Dam isn't going away any time soon - the ore body apparently has a 200-year economic life at current extraction rates!

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  bevans Site Admin

Location: Melbourne, Australia
The mine is a huge money spinner for Oz Minerals.  Projected NET cash-flow (including capital investment) of $8.058 billion!

I think they can afford a rail line to the mine.  The mine is actually quite a distance from the planned BHP facility not sure of the relevance?
  LancedDendrite Chief Commissioner

Location: North Haverbrook; where the monorail is king!
I think they can afford a rail line to the mine.  The mine is actually quite a distance from the planned BHP facility not sure of the relevance?
bevans
It's more relevant to their proposed Carrapateena Copper-Gold project, which is ~100km south-east of Olympic Dam. Theoretically, you could have one railway line serving both projects that would connect to the Transcontinental line.

Prominent Hill already road-hauls its output to a rail siding on the Adelaide-Darwin line south of Coober Pedy.
  LancedDendrite Chief Commissioner

Location: North Haverbrook; where the monorail is king!
Actually, it gets better - OZ Minerals wants to cart ore from Carrapateena to Prominent Hill for refining to avoid a double-up in plant. Olympic Dam lies between the two projects and Prominent Hill has a transmission line that runs to Roxby Downs for their electricity supply; that means their is a corridor through the Woomera Prohibited Area that they could use with less problems.

So you've got ore from Carrapateena to Prominent Hill, concentrate from Prominent Hill back towards the Transcontinental Line that originated from both Prominent Hill (initially) and Carrapateena and also perhaps various concentrate stocks from Olympic Dam as well. Sounds like a winner if the numbers work out.
  bingley hall Minister for Railways

Location: Last train to Skaville
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In another world, GWA, the various above-rail freight operators or even the ARTC would be crawling all over this kind of business opportunity. Olympic Dam isn't going away any time soon - the ore body apparently has a 200-year economic life at current extraction rates!
LancedDendrite
Probably not - just more Aussie cringe.
  bevans Site Admin

Location: Melbourne, Australia
Probably not - just more Aussie cringe.
bingley hall

Aussie cringe?
  bingley hall Minister for Railways

Location: Last train to Skaville
Aussie cringe?
bevans
Saying that they'd do things differently elsewhere in the world, when the reality is they probably don't.

And expecting taxpayers and other businesses to subsidise the mining industry.

Interestingly GWA invested $60m in new locos in 2012 for a mining project and after less than 3 years the mining company has left them with no work for these engines. Why would Dendrite think they would even consider investing in other mining related activities in the future? Telling other people what they should be doing with their money is always such fun.
  Pressman Spirit of the Vine

Location: Wherever the Tin Chook or Qantas takes me
In another world, GWA, the various above-rail freight operators or even the ARTC would be crawling all over this kind of business opportunity. Olympic Dam isn't going away any time soon - the ore body apparently has a 200-year economic life at current extraction rates!
People tend to forget why there isn't already a rail line to the Olympic Dam site.
BHP refine the copper ore and uranium on site.
There is no massive tonnage of ore leaving the area (unlike other mines mentioned)
Uranium leaves in 200lt drums packed into containers
Copper leaves in pallet size sheets of near pure copper and some smart bugger worked out how to make space for 4 pallets on the front and rear of bulk pneumatic concrete trailers (so the trucks have a back load to Adelaide)

When the idea of a rail link to Olympic Dam was proposed as part of the shelved expansion, it was more about the movement of large quantities of materials TO the mine site (Fuel Oil, Concrete etc) than product away from the mine site. Even then BHP really wanted someone else to pay for and build the rail link. (Read that as Gov or private rail operator)

As far as I can work out OZ minerals mines (Carrapateena and Prominent Hill) output unrefined ore, which means bulk tonnage.
Carrapateena is to the east of the once proposed Olympic Dam branch.

If OZ wants to rail product between their sites maybe they'd be better off building two branches between their sites and the Trans / Darwin line
  Pressman Spirit of the Vine

Location: Wherever the Tin Chook or Qantas takes me
Actually, it gets better - OZ Minerals wants to cart ore from Carrapateena to Prominent Hill for refining to avoid a double-up in plant. Olympic Dam lies between the two projects and Prominent Hill has a transmission line that runs to Roxby Downs for their electricity supply; that means their is a corridor through the Woomera Prohibited Area that they could use with less problems.

So you've got ore from Carrapateena to Prominent Hill, concentrate from Prominent Hill back towards the Transcontinental Line that originated from both Prominent Hill (initially) and Carrapateena and also perhaps various concentrate stocks from Olympic Dam as well. Sounds like a winner if the numbers work out.
LancedDendrite
From the link you posted
Rail Infrastructure Pre-Feasibility Study



A scoping study completed in 2014 identified significant potential benefits from the development of new rail

infrastructure to transport Carrapateena ore to the existing high quality processing plant at Prominent Hill.

The Company has now commissioned a pre-feasibility study to further develop this concept. As part of this

work, an evaluation of third party build/own/operate financing of the rail will be undertaken, which could see

significantly lower upfront capital required to develop Carrapateena. The study is expected to be completed

during 2015.

As with the once proposed BHP Olympic Dam expansion They want someone else to pay for and build the line!

And remember that the Defence Department wants to have the ability to close the Stuart Highway and Tarcoola-Darwin rail line to ALL traffic for 24 hour periods whenever they wish, so a "corridor" through the Prohibited Woomera site means nothing really.
Additionally a power transmission line corridor will not mean that a rail line could follow the same route. (It certainly IS NOT flat barren land out there!)
  ParkesHub Chief Commissioner

One might think there is an opportunity for rail to Olympic dam since the incumbent linehaul provider, Linfox, has just lost the contract. BHP are desperate to reduce haulage costs and have the railhead at Port Adelaide pretty much intact (after Linfox leave!)
  LancedDendrite Chief Commissioner

Location: North Haverbrook; where the monorail is king!
Moving consumables and products onto rail seemed to be a major part of the 2011 Olympic Dam expansion - Yeah yeah, I know it's been mothballed of course, but the documents are still there:
http://www.bhpbilliton.com/home/society/regulatory/Documents/Olympic%20Dam%20Supplementary%20EIS/Information%20Sheets/BHP%20Billiton%20Olympic%20Dam%20Expansion%202011%20Summary%20Booklet.pdf
Seems like they wanted to move towards exporting bulk copper + silver + uranium concentrate instead of expanding the refinery complex.
  bingley hall Minister for Railways

Location: Last train to Skaville
Moving consumables and products onto rail seemed to be a major part of the 2011 Olympic Dam expansion - Yeah yeah, I know it's been mothballed of course, but the documents are still there:
http://www.bhpbilliton.com/home/society/regulatory/Documents/Olympic%20Dam%20Supplementary%20EIS/Information%20Sheets/BHP%20Billiton%20Olympic%20Dam%20Expansion%202011%20Summary%20Booklet.pdf
Seems like they wanted to move towards exporting bulk copper + silver + uranium concentrate instead of expanding the refinery complex.
LancedDendrite
WMC and their successor BHPB were making similar platitudes long before the expansion project was announced.

BHPB are only interested if someone else pays for the rail link. What a former CEO of ARTC once said about them in this context is unprintable.  

Having said that I look forward to one day being proved wrong on this issue, though an intermodal railhead at Pimba is still the most likely outcome.
  bingley hall Minister for Railways

Location: Last train to Skaville
One might think there is an opportunity for rail to Olympic dam since the incumbent linehaul provider, Linfox, has just lost the contract. BHP are desperate to reduce haulage costs and have the railhead at Port Adelaide pretty much intact (after Linfox leave!)
ParkesHub
So who won the contract? I thought it was still up for tender?
  freightgate Minister for Railways

Location: Albury, New South Wales
I would expect customers to pay for aindings but should they pay for a branch line ?

If ARTC fund the link they the return is track access fees.

On the flipside bhp could pay for the branch line and would not incur track access fees. They would have to maintain it but they already know how to do that.

In reality it is infrastructure which should be costed into the mine development. Oz minerals hae obviously budgeted for it
  ParkesHub Chief Commissioner

So who won the contract? I thought it was still up for tender?
bingley hall
Apparently BHP are playing Toll plus a few others amongst each other. Seems nothing is firm yet.

BHP were in trouble 12 months ago with this site and went back to the service providers asking for some relief (contractually). From what I hear, all but Linfox came to the party.... now LFX are paying the price!
  Pressman Spirit of the Vine

Location: Wherever the Tin Chook or Qantas takes me
[quote=freightgate]In reality it is infrastructure which should be costed into the mine development. Oz minerals hae obviously budgeted for it[/quote]Yep, they have budgeted absolutely [b]nothing[/b] for it whatsoever ...... As I quoted in my post above
[i]"[font=Thread-00003258-Id-00000075][i]As part of this [/i][i]work, [b]an evaluation of third party build/own/operate financing of the rail[/b] will be undertaken, which could see [/i][i]significantly lower upfront capital required to develop Carrapateena.[/i][/i][/font]
  LancedDendrite Chief Commissioner

Location: North Haverbrook; where the monorail is king!
Yep, they have budgeted absolutely nothing for it whatsoever ...... As I quoted in my post above
"As part of this work, an evaluation of third party build/own/operate financing of the rail will be undertaken, which could see significantly lower upfront capital required to develop Carrapateena."
Pressman
Luckily there's plenty of capital around in Australia that would be very interested in backing a BOO project like that - superannuation funds. Although they might still be spooked after the Freightlink debacle, we're talking a much smaller amount of capital - probably around $350-400 million for a siding to Prominent Hill, a branchline from Pimba to Carrapateena plus rollingstock.
  bingley hall Minister for Railways

Location: Last train to Skaville
In reality it is infrastructure which should be costed into the mine development. Oz minerals have obviously NOT budgeted for it
freightgate
Edited for accuracy
  bingley hall Minister for Railways

Location: Last train to Skaville
Luckily there's plenty of capital around in Australia that would be very interested in backing a BOO project like that - superannuation funds. Although they might still be spooked after the Freightlink debacle, we're talking a much smaller amount of capital - probably around $350-400 million for a siding to Prominent Hill, a branchline from Pimba to Carrapateena plus rollingstock.
LancedDendrite
Similar to the model that Adani is trying to con POSCO into funding in the Galilee Basin. "The transport infrastructure numbers don't add up so let's get someone else to take the risk"

There may be plenty of capital around, but who's going to be mug enough to invest in high risk projects given the current volatile states of the various minerals markets.

EDIT: And just thinking about things a bit more. ARTC invested heavily (around $35m) to install CTC signalling, just recently, between Coonamia and Tarcoola, mainly to accommodate extra traffic generated by the Arrium and IMX Resources contracts. True it will have improved the asset base, yet within two years both traffics have ceased and ARTC now has no additional access revenues to pay the bill.
  donttellmywife Chief Commissioner

Location: Antofagasta
Yep, they have budgeted absolutely nothing for it whatsoever ...... As I quoted in my post above
"As part of this work, an evaluation of third party build/own/operate financing of the rail will be undertaken, which could see significantly lower upfront capital required to develop Carrapateena.
Your first sentence in the above isn't supported by the text you've quoted.  I bet you their budgets do have an allowance for it, otherwise there would be no point doing the evaluation that is mentioned.

As a stand-alone proposal (not the rail link option being mentioned above), the mine required about $3 billion of up front capital expenditure (more probably, because sometimes it can take a while for these operations to be cash flow positive even after you start shipping product).  As a measure, that's about double Oz Minerals market capitalization and a fair bit more than their current total assets.  On their own, I doubt they have the capability to raise the money from lenders and shareholders to do this.  They were pretty clearly looking for other parties to come on board to help get the necessary bucket of money required up front together.  

Getting a rail freight provider involved for this project option is just a variation on that.

If Oz financed the line itself, then the costs of operating the line would just be the basic costs of operating the line.  If a rail provider financed it, then to cover putting their capital at risk (and no real investment comes without risk), the rail freight provider would impose rail freight charges and the like that were well above the basic costs of operating the line.  From Oz's point of view, you trade off lower capital cost for higher ongoing operating costs.

Whether any rail provider thinks the risk/reward arrangement is worthwhile remains to be seen.
  freightgate Minister for Railways

Location: Albury, New South Wales
The amount off ru required to
Build the line on rural Australia would be what ? Any hazard a guess ?

It would I believe be one of the cheaper items on Te build list for the mine.

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