Waratah’s plans to open up new coal province

By Paula Wallace

Shen Heting, the president of MCC, had just delivered a letter to Waratah’s owner Professor Clive Palmer outlining support for the project in the form of a 10 per cent equity interest.
Under a memorandum of understanding (MOU) with Palmer’s company Resourcehouse, MCC will develop the project and the company will also arrange for 70 per cent of the project costs through debt financing.
MCC has also committed to buy a minimum of 30 million tonnes of the 40 million tonnes of coal a year the project is expected to produce over a 25-year life, with a Hong Kong listed power corporation as an end user.
The news came after speculation had surfaced that Professor Palmer was considering an IPO in Hong Kong for Resourcehouse.
Professor Palmer has described the China First development as “the project of the century” because it will open up the coal resource in the Galilee Basin.
The China First development has been granted Major Project Facilitation (MPF) status by Federal Infrastructure Minister Anthony Albanese and also declared “Significant Project” by the Queensland Government, which fasts tracks the approvals process.
Lynch told delegates of the Galilee Basin Coal conference in Brisbane, “You may have heard some other things in the paper about Mr Palmer and his IPO arrangements in Hong Kong. I’ll make no further real comment about that other than that obviously we have to have equity and a debt proportion to then start building the project.”
He described a 40 million tonne per annum thermal coal for export project, encompassing a new railway line and port facilities at Abbot Point. It is due to commence construction in 2010 with first production in the third quarter of 2013, at a capital cost of A$7.5 billion.
Referring to a comment from a previous speaker at the conference, Lynch continued his analogy of the Galilee Basin as a recalcitrant child who is yet to come of age.
“The Galilee Basin’s been nutured through to puberty by the government playing a very calm, careful paternal role. I think that the child has now reached late puberty and is currently going to parties with a variety of supposed friends,” said Lynch.
“…it won’t be very long before the Basin settles down, makes some decisions about the direction it wants to take in life and starts to make its former parents proud.”
He said that what the Galilee Basin needs is world class infrastructure to connect it to a market with a very strong appetite.
“China is currently producing just over 3 billion tonnes of coal…It’s scheduled to increase so much so that in the next 15 to 20 years, China is predicted to be consuming 5.2 billion tonnes of coal.
“The opportunity for the Galilee Basin in terms of the parties that it’s going to is that the Galilee Basin is much more accessible. So in terms of the number of drinks you’ve got to buy the Galilee Basin to get some action it’s a lot less than what it will take to develop those coal resources in far western China.”
Lynch said the location of the Galilee Basin is as much an opportunity as a “distraction”.
“The opportunity is that we’re looking at fly-in fly-out for our workforce…we believe that means the Galilee Basin could become the place for a lot of coal miners to work because they can live in say Brisbane, Mackay or Rockhampton.”
The project is also aiming to solve some of its power needs by building a clean coal power station and interconnection to the eastern grid with 200 kilometres of power line.
“There’s not sufficient power in the Galilee Basin at this stage…there’s nowhere near enough capacity in it even for our first project which is 150 Megawatts.
“We’ve announced a clean coal power station project that will inter-relate to projects such as the Isa Link, to provide the opportunity for low-cost power which is…greenhouse compliant for the long-term needs of the State,” said Lynch.
In producing 40 million tonnes of export coal, the China First project will produce 16 million tonnes of reject a year. A significant proportion of that reject while it’s too high in ash to export is an ideal feed for the clean coal power station project.
Lynch said the two key markets for this electricity are the eastern and western part of the Northern Economic Triangle.
“The opportunity then is to generate electricity in the Galilee Basin and to deliver that to the Mount Isa market as well. The initial market is already 400 and something Megawatts a year but ultimately if the power is available at the right price, then a lot of other mineral deposits will look at coming into fruition.”
Lynch said the issue of overlapping interests in the Basin may not necessary present the problems being predicted today.
“We’ve been doing gas bomb testing in all of coal seams that we’re targeting for the undergrounds…and our highest methane gas content we have recorded anywhere in the China First lease is 0.02 cubic metres per tonne.”
At this stage, the deepest hole would be 380 metres depth of cover and Lynch said “that’s 25 years away in the second line of panels.”
“So we might see very efficient longwall mining down to 400 metres and coal bed methane deeper….It could all turn out to be fantastic, everything might just fit into its own niche and there may not be as much overcomplication as we think,” he said.