A simple equation: Mineral development – Railways = Expensive dirt!


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Ken Devencorn, Technical Director, Resources & Manufacturing Services, from Aurecon has presented at the Heavy Haul Rail Africa. If you would like more information about the conference, please visit the website: www.railconferences.com/heavyhaulrail/africa

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A simple equation: Mineral development – Railways = Expensive dirt!

  1. 1. Mineral Development has less to do with miningthan it does with Heavy Haul RailHeavy Haul Rail Africa 2012, Nov-2012Ken Devencorn, Technical Director - Rail, Aurecon
  2. 2. 2•  The more accessible resources get developed first•  The world’s continued appetite for resources means thatnew frontiers have to be conquered•  More “challenging” mining techniques (e.g. deeper andmore remote mines), and more “challenging” export logisticschainsResource Development in the 21st Century“All the easy projects have been done”
  3. 3. 3•  Logistics chains andgetting longer•  The terrain over which thetransport corridor is to bebuilt is becoming harsher•  Rail becomes a moredominate mode due toincreased distances and“haul economics”Resource Development in the 21st Century“All the easy projects have been done”
  4. 4. 4The total export logistics chain becomes exponentially morecomplex as more remote resources are developed•  Mine logistics network,•  Rail logistics network,•  Port logistics (and bulk materials handling),•  Shipping logistics network•  End User logistics networkRail, as part of the “Whole of Logistics Chain”Remote resource developments = Longer and more complexlogistics chains
  5. 5. 5The key to successful remote resource developments lays in thelogistics chain -Rail, as part of the “Whole of Logistics Chain”Logistic chain thinking•  Smarter mining techniques might deliver the product to thestockpile cheaper – but nothing will make it closer to the User•  The “whole of supply chain” is critical – evaluating andoptimising each element of the chain to its optimal efficiency•  Competitive remote resource projects will be those whichidentify the intrinsic inter-dependencies of the variouselements – mine, rail, port, and bulk materials handling - andhow each impact upon each other•  A hard-won saving in smarter mining costs can be completelylost to a “less than optimal” rail solution – hence, resourcedevelopers are striving to better understand the logisticschain
  6. 6. 6In Australia, we have seen:•  Battles for access to other’s rail networks, e.g. FMG’s request for access to BHP’sWA rail network•  Major proponents in Queensland’s Galilee Basin proposing to develop their ownrail networks - QR National adding to the mix of mining proponentsRail is critical to resource developmentLogistic chain thinkingIn Africa, we have seen:•  Rio Tinto, BHP, Vale and others in West Africa struggling to get the rail componentsorted out: digging up the resources in one country and transporting acrossanother is a major obstacle•  Vast coal resources in land-locked Botswana are likely to remain ‘expensive dirt’unless a solution can be found – the proposed 1500km Trans Kalahari RailIn Mongolia and China, we see:•  Rail as an essential element to exporting coal from Mongolia to neighbouringChina•  Heavy haul rail expansions in China have led to significant economic growth withmore planned in the years ahead
  7. 7. 7•  Mongolia has proven coal reserves of 12,200Mt•  In recent years export opportunities have increased with thediscovery of high quality coking coal•  Coal exports increased from 0.5Mt in 1990 to 6.8Mt in 2009to more than 21Mt in 2011•  Proximity to thelucrative Chinesemarket increasesvalue•  Efficient heavy haulrail is essential toextracting this valueThe Mongolian ContextSome Statistics
  8. 8. 8•  The majority of Mongolian coal is presently transportedby road•  Road based transport of coal damages roads, causingaccidents and deaths•  Efficient heavy haul rail reduces transportation cost, andreduces accidents and deaths•  Planned resourceprojects worth$20billion demandefficient transport•  Consequently, morethan 5,000km of newrailroad planned forconstructionThe Mongolian ContextRoad is seen to be the limiting factor
  9. 9. 9•  Until 2009, most of Mongolia’s rail network comprisedbroad gauge track (1520mm)•  Chinese rail network is predominantly standard gauge(1435mm), adding to the challenge of transporting toservice this market•  New rail is plannedto be 1435mm withsome dual gaugingbeing considered•  A well plannedheavy haul railnetwork shouldconsider the marketit is servingThe Mongolian ContextThe Gauge Debate
  10. 10. 1025% of the world’s total rail freightis carried on the Chinese railwaynetworkChina’s rail network spans93,000km, yet a significant amountof bulk materials are stilltransported by roadThe growth in Chinese rail networkdevelopment has beenphenomenal over the past twodecades, and is not likely to abatein the near future.On some corridors, rail expansioncannot keep pace with minedevelopments, causing massiveroad traffic jamsThe Chinese ContextSome Staggering Statistics
  11. 11. 11China has constructed asignificant number ofdedicated coal rail networksover the past two decadesThe principal coal railnetworks transported morethan 1.2Billion tonnes in 2011– this is expected to double by2020Heavy haul rail is contributingsignificantly to the economicgrowth in ChinaRailway  Name km2011    Actual2020  ForecastMtpa  Xilinhot-­‐Chifeng 336 10 35ShenShuohuang 799 177 350Mengji     157Jitong 945 35 35Jingbao 824 120 120Mengxi-­‐Huazhong 1,837   200Daqin 653 440 480Central  South  Corridor 1,260   200Fengshada 457 80 85Jintai/Jinyuan 437 20 20Hanchang 220 20 62Houyue 252 89 120Shitai 251 110 130Taijiao 434 50 85Longhai 1,759 40 120Xikang 260 16 90Ningxi 953 25 70TOTAL   1,232 2,359The Chinese ContextCoal Rail Growth
  12. 12. 12•  The Galilee is one of the lastremaining, undeveloped coalresources in Queensland•  Expected to become thelargest coal producing regionin Qld, if not Australia•  More than 20 companies areexploring in the area –14Billion tonnes of (mainly)high quality thermal coal•  5 proponents haveannounced significant projects- combined export capacity ofmore than 200MtpaThe Australian ContextRail is critical to resource development (Queensland’s Galilee Basin)
  13. 13. 13Until recently, each of themajor proponents werepursuing their own raildevelopment from the Galileeto the Port of Abbot Point•  This was despite thesignificant economies ofscale of a dedicated “Multi-User” heavy haul rail line•  A high level economicassessment demonstratesthe benefits of a jointdevelopmentThe Galilee BasinThe case for cooperation
  14. 14. 14The Galilee Basin ProponentsAlpha Coal Project (Hancock Coal / GVK)•  30Mtpa open-cut coal mine,with potential for futuredevelopment - adjacent sistermine, Kevin’s Corner withsimilar output potential•  Combined export potential inthe order of 50 to 60Mtpa•  Proposed 495km railway•  Dedicated heavy haul,standard gauge, with passingloops•  25,000 tonne payload trains
  15. 15. 15•  40Mtpa “mega” coal mine•  Proposed 471km railway•  Dedicated heavy haul,standard gauge, withpassing loops•  24,000 tonne payloadtrainsThe Galilee Basin ProponentsChina First Coal Project (Waratah Coal)
  16. 16. 16•  60Mtpa “mega” coal mine•  Two export channels –o  Narrow gauge (1067mm)connection to QR Nationalnetwork (to service DudgeonPoint Coal Terminal)o  Standard Gauge (1435mm)connection to Abbot PointThe Galilee Basin ProponentsCarmichael Coal Project (Adani Coal)
  17. 17. 17•  Combination/compromise ofother Galilee Basinproponents’ rail corridors•  Narrow gauge (1067mm)connection to QR Nationalnetwork - to Abbot Point CoalTerminal•  Facilitates greater use ofrecently constructed GAP(Goonyella - Abbot Point raillink) – the “Northern MissingLink”The Galilee Basin ProponentsCentral Queensland Integrated Rail Project (QR National)
  18. 18. 18•  High volume of product from the GalileeBasin supports a dedicated rail networkto the Port of Abbot Point•  Standard gauge (1435mm) providessignificant ‘whole-of-life’ benefits•  Collaboration – within an “Open Access,Multi-User Regime” by the proposedminers in the Galilee Basin would yieldsignificant savings•  Combined (shared) benefit in the orderof $600m per annum capital charge•  Each individual miner can be expectedto save between $92m and $244m p/aThe Galilee BasinThe case for cooperation
  19. 19. 19The Galilee Basin Rail CollaborationCollaboration facilitated by a Special PurposeVehicle - all parties have a seat at the tableThis structure has been effective in a number ofsimilar developments – it does require a clearunderstanding of roles, contributions, andownership sharesOngoing access charges for the use of theGalilee Basin Rail will need to be developedThe benefits of joint development of the rail isworth the effort!The Galilee Basin Rail is an excellent example of where thelogistics chain is an intrinsic element of resource economics- of getting the product to the market. Without efficient HeavyHaul Rail, the product remains “expensive dirt” .
  20. 20. 201.  Master Planning + Rail Economics2.  Business Case + ConceptDevelopment + Project Feasibility+ Estimating3.  Operational Simulation + CapacityModelling4.  DORC Valuation + TariffDevelopment5.  Competition/Regulatory Advice6.  Rail Civil + Alignment Studies +Yard Design + Structures7.  Rail Signalling + Comms + OHTPower + “Intelligent Rail Systems”8.  Accreditation (RailwayManagement) + Rail Safety + RailRisk9.  Asset Management (Rolling stock +“Below Rail”)Heavy Haul Rail Development Requiresa Complex mix of Skills
  21. 21. 21Integration across the entire logistics chain provides some realbenefits for a very small investment –The Benefits of Integration•  Co-Ordination of Long-TermPlanning across mine, rail,bulk materials-handling, andport•  “Opportunistic maintenance”by all chain members•  Drives competition - JIT andXOT management meansthat a “cargo ready” minecan benefit•  The overall efficiency of thelogistics chain takesprecedence over the settimetable
  22. 22. 22Expertise in heavy haul rail has been a major contributor to theeconomic growth in Australian export resourcesAustralian Innovation in Heavy-Haul Rail•  Technology has improved -longer, heavier trains made up ofmore powerful locomotives andhigher-capacity wagons – so toohas operations planningexpertise•  We’re now seeing the benefit ofintegrated, and co-ordinatedoperations – and this meansinformation sharing, co-ordinatedproblem solving, andopportunistic operations to drivesupply chain throughput.
  23. 23. 23Operational Modelling across the entire logistics chain canreveal a concise understanding of the issues to be consideredand managed – and yield higher throughput from lessinfrastructure investmentOperational Modelling and SimulationComplex processes should bemodelled and assessed and theoperational solution “stress tested”under a variety of scenariosAs Albert Einstein once remarked,"Two things are infinite: theuniverse and human stupidity; andIm not sure about the universe"Whole of supply chain OperationalModelling demonstrates the“knock-on effect” that a decision inone part of the chain can haveupon the entire supply chain
  24. 24. 24Heavy Haul Road is often the first step on a staged approach –•  Haul Trucks•  Road Trains•  Coal Road Trains•  Coal/Minerals TrainsThis as an intrinsicpart of “MasterPlanning” – a stageddevelopment approachto maximise clientbenefit at each stageof the developmentlife-cycle of the projectHeavy-Haul Rail and Road
  25. 25. 25Master Planning provides a focussed commercial andoperational solution to rail development. Hence, a process of -•  Assessing the base traffic requirements•  Determining future requirements for rail traffic•  Evaluating the capacity of the existing rail system or the proposedinfrastructure•  Constraints to capacity growth - often the existing infrastructure is notoperated the way it was originally designed•  Economic analysis and financial modelling of the base traffic to assessviability•  Alternative capital investment options, or staging options•  Static and Dynamic Modelling to provide a “whole of life” costing on suchelements as fuel burn, train crew costs, capital reinvestment, againstproofed cycle timesHeavy Haul MasterplanningEnsuring that the solution meets present demand without limiting future growth
  26. 26. 26In Summary, Without Heavy Haul RailResources remain just “expensive dirt”
  27. 27. 27Thank you,Questions and Discussion