Business & Finance

$425m Hail Creek Coking Coal Project Goes Ahead

June 1st, 2001

Rio Tinto and its joint venture partners have approved the development of the A$425 million Hail Creek Coal Project, in central Queensland near Mackay. The Hail Creek Coal Project is based on one of the largest coking coal deposits in the world, with total resources estimated at 1.2 billion tonnes. The project is located 85 kilometres west of Mackay.

Chief Executive Rio Tinto Energy group, Mr Greg Boyce, said conditions in the international coal market were right for the development of Hail Creek.

"Mine closures in Canada and an energy shortage in the US have provided a natural opening for a new mine like Hail Creek," Mr Boyce said.

"Its low sulphur characteristics offer significant environmental advantages, which buyers have picked up on."

Strong support has come from buyers in Asia and Europe, with Letters of Intent received for fifty per cent of project output. Discussions with other customers are continuing.

The proposed open cut coking coal mine is a joint venture between Rio Tinto's wholly-owned Queensland coal subsidiary, Pacific Coal (92.00%), Marubeni (5.33%) and Sumitomo (2.67%). Pacific Coal will build and manage the operation.

"We have seen significant improvement in the production and financial performance of our Queensland coal operations," said Mr Brian Horwood, Managing Director of Pacific Coal.

"It is because of these improvements, we have the confidence to invest in the world class resource at Hail Creek," Mr Horwood said.

Once fully operational, the mine will produce 5.5 million tonnes of high quality hard coking coal every year for the export market, generating annual export earnings in excess of A$400 million at current market prices.

The A$425 million investment will include a dragline, mine infrastructure, wash plant and a 52-kilometre railway link to the Goonyella rail line.

Coal from Hail Creek will be railed 175 kilometres to the Dalrymple Bay Coal Terminal. The first shipments will occur in the third quarter of 2003.

Pacific Coal manages the Blair Athol Coal, Kestrel Coal and Tarong Coal mines, all in Queensland.