Aurizon Aims to Complete Rail Accord With GVK by Mid Next Year

Aurizon Holdings Ltd. (AZJ), Australia’s biggest haulage company, is aiming to complete an agreement to build a railroad for a $10 billion coal project owned by India’s GVK Group and Gina Rinehart by the middle of next year.

“We’re talking with respect to calendar year ’14, middle year and beyond to go to that next phase,” Lance Hockridge, chief executive officer of Brisbane-based Aurizon, told reporters today during a media call.

Aurizon and GVK in March signed an initial pact to construct and transport coal from GVK’s thermal coal projects in Australia’s Galilee basin located about 500 kilometers (310 miles) from the coast. GVK acquired the assets for $1.26 billion in 2011, before a slump in thermal coal prices and industrywide spending cuts.

The joint venture, in which Aurizon will acquire a 51 percent stake in the rail and provide construction funding for its share, is part of a push to develop Aurizon’s network servicing coal mines in Queensland, said Hockridge.

Aurizon fell 0.4 percent to A$4.68 at the close in Sydney, paring gains since the start of the year to 25 percent.

Aurizon operates haulage networks in most Australian states, including Queensland, the world’s biggest exporter of coal used in steelmaking. The decline in the price of coal for electricity generation has prompted companies including Glencore Xstrata Plc, the biggest exporter, to shutter some mines. GVK and Aurizon last month agreed to scale back the amount of new rail lines for the project to 300 kilometers from 500 kilometers by using part of Aurizon’s existing network.

“We have proposed to put in place rigorous financial and commercial underpinnings of any development,” Hockridge said, declining to specify how much the rail component of the $10 billion mine, rail and port project would cost.

GVK, which has been in talks for funding since 2011, plans to ship coal to India from the 32-million-metric-ton Alpha mine.

Australian billionaire Gina Rinehart’s Hancock Prospecting Pty owns a 21 percent stake in the Alpha project, according to a presentation on the GVK website.

To contact the reporter on this story: Elisabeth Behrmann in Sydney at ebehrmann1@bloomberg.net

To contact the editor responsible for this story: Andrew Hobbs at ahobbs4@bloomberg.net

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