Australian Coking Coal Terminal Facing Three-Month Delay

The completion date for a much-needed expansion of Australia's biggest coking coal export terminal has been delayed by three months.

The owner of the Dalrymple Bay Coal Terminal, Babcock & Brown Infrastructure, confirmed fears that bad weather, which swamped Mackay in March, had pushed back the final completion date for Phase 2/3 of the port's expansion to an annual capacity rate of 85 million tonnes, and would not be finished until the end of March next year.

The delay has been approved by both BBI and the eight coalminers (including BHP Billiton, Rio Tinto and Xstrata) which use the port with all parties declining an opportunity to make up for the missed time and finalise construction by the previously scheduled deadline of December. BBI is spending $1.2 billion to expand DBCT as capacity constraints hamper the miners' ability to fully cash in on record prices and rampant demand for Australian coal. It comes as BBI and the port users mull a further expansion to 100 million tonnes per year.

BBI expects the Phase 2/3 expansion to be 45 per cent complete by year's end with the port to have an annual output rate of 72mtpa by that stage. The Phase 2/3 expansion includes the addition of a fourth shipping berth at the terminal along with extra stockpile machines and a third out-loading system to the expanded wharf.

DBCT acting chief executive Eric Kalatchew said that, based on preliminary estimates, an additional $40 million might have been enough to ensure that the Phase 2/3 expansion was finalised for the end of this year. However, he added that all stakeholders, including the coalminers, decided it was not worth the risk in spending the extra money. Despite the delay for the completion date, Mr Kalatchew said the project remained on budget and BBI security holders would still receive a 15c dividend per security for 2008. "The users said there was too much risk involved," Mr Kalatchew said. "We could do the work and spend the extra money and still not get the additional through-put through the port."The additional cost was an estimated $40 million but, looking at it further, it was dependent on additional equipment to run two different work fronts. We would have needed specialty equipment and the cost was likely to rise further. And it was going to be on a best endeavours type commitment."

Part of the problem facing DBCT was that it might not have been able to convince the Queensland regulator of the added value as an asset from the extra expense incurred. The regulator is the key to fixing the fees, which DBCT can charge port users. Also, there was no guarantee from the coalminers that they would be able to fill the extra capacity. BBI expects to lose about $1 million a month in cash flows because of the delay. But chief financial officer Jonathon Sellar said that represented less than 1 per cent of expected cash flows for this year.

Source: The Australian