http://www.theaustralian.com.au/business/xstrata-in-15bn-queensla...

http://www.theaustralian.com.au/business/xstrata-in-15bn-queensland-coalmine-bonanza/story-e6frg8zx-1225825229327

Xstrata in $15bn Queensland coalmine bonanza
ANGLO-SWISS miner Xstrata is hatching plans to build a huge 100-million-tonnes-a-year thermal coal operation in Queensland that could cost $15 billion and rival the Hunter Valley as the nation's biggest coal-producing region.

Xstrata, the world's biggest thermal coal exporter, and its Japanese joint venture partners intend to expand almost fivefold the current planned output of 22 million tonnes a year near the small town of Wandoan, 400km northwest of Brisbane, in the next 10 to 20 years.

The plans come as Xstrata chief executive Mick Davis calls an end to nearly a decade of aggressive growth by acquisition, saying his company will now focus on organic growth.

Xstrata's plans are ambitious. By comparison, Newcastle, the world's biggest coal port, ships about 90 million tonnes of coal a year, while Queensland currently produces less than 45 million tonnes a year of thermal coal.

Thermal coal is used in power stations.

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Coking coal, which is higher quality, is used to make steel. It is mostly exported from Queensland.

According to the Paris-based International Energy Agency, global coal consumption is forecast to grow almost 40 per cent in the next 20 years as electricity demand increases.

Xstrata Coal's chief development officer, Jeff Gerard, told The Australian that Wandoan was expected to expand in four stages and could be producing 100 million tonnes a year sometime in the 2020s.

"Xstrata Coal is developing all of this based on a strong view of demand," Mr Gerard said yesterday. "We will be maintaining our lead position as a thermal coal exporter.

"Growing demand globally means there are a number of basins that will need to open up around the world, and Wandoan is ranked highly against all others in terms of quality, cost and proximity to port."

Last year, Xstrata tried unsuccessfully to merge with AngloAmerican in a deal that would have created Australia's biggest coal producer, among other achievements.

In a presentation at the end of last year, Mr Davis told investors not to hold their breath for another company-transforming acquisition.

While it may make bolt-on acquisitions, Xstrata was focusing on making existing assets perform and developing new ones, he said.

All coal from the first Wandoan mine, which will be one of Australia's biggest, could be exported through Gladstone's planned Wiggins Island terminal.

If Wandoan is expanded, under Xstrata's plan to have four mines each producing 25 million tonnes a year there, coal would probably be shipped through Xstrata's planned Port Alma terminal to the north of Gladstone.

Port Alma is being designed to handle 35 million tonnes a year, but could be expanded.

Xstrata owns 75 per cent of the Wandoan leases, with Itochu and Sumitomo owning 12.5 per cent each.

Xstrata says the area could contain between four and 7.7 billion tonnes of coal. About $3bn will be spent building the first mine at Wandoan, which is currently going through the approvals process, and about the same again for infrastructure. Construction is to start next year, with first coal exports in 2014. The three other mines are expected to cost $2bn-$3bn each, with lower infrastructure costs.



The ETS and any resource rent tax could affect the development, Xstrata said.