Hansard: the Railway (Tilley to Karara) Bill 2010 and its importance to the Mid West, Gardiner
Author: Philip Gardiner
Published on: 30-June-2010
HON PHILIP GARDINER: I will speak briefly to the Railway (Tilley to Karara) Bill 2010, which the National Party supports. There is an urgency with this bill because an iron ore project in the Mid West is very close to being ready for production. One project will make a first shipment next week, with iron ore coming out of Perenjori. However, the Karara project has huge potential; it is a world-class magnetite deposit and it also has a haematite deposit. Of course, haematite can be exported as it comes straight out of the ground, whereas magnetite needs to be treated before being exported. The route to the port is dependent upon the first stage as relates to the bill we are debating tonight; that is, building the narrow-gauge railway line equipped with dual-gauge sleepers, which means that standard-gauge rails can be put in place afterwards to take the iron ore to Geraldton port.
The Karara resource is about 2.5 billion tonnes at 36 per cent iron, and the initial shipments will be about eight million tonnes per annum. Those initial shipments will begin around mid-2011—just over 12 months away—and the railway line from Karara to Morawa needs to be built during this time. The importance to Western Australia of having this railway line operating is that eight million tonnes represents about $1 billion of export revenue, which also happens to represent about $50 million coming to the state. Infrastructure is a complex area in cases involving so many unknowns. There are a lot of plans in the Mid West area, but, as we all know, there is many a slip between cup and lip, and such slips could occur in this area. WestNet is a subsidiary of Prime Infrastructure, 40 per cent of which is owned by Brookfield, the same company that took over the Roberts’ construction company Multiplex. It is a very strong Canadian company with, I think, $90 billion of assets. Therefore, it is very strongly positioned financially. Prime Infrastructure, the company that 100 per cent owns WestNet, is without any borrowings, so it also is in a very strong financial position. Nevertheless, it is WestNet that is leasing the railway line from Morawa—in fact, even from Perenjori—through to Mullewa, and then across to Narngulu to Geraldton. At Geraldton, Gindalbie, which is a 50 per cent shareholder of the Karara deposit and the second largest Chinese steel producer, has the potential to ship up to 14 million tonnes of iron ore. WestNet is renovating its current narrow-gauge lines from Perenjori to Geraldton. The Karara to Tilley line will feed into the narrow-gauge line to Mullewa and then onto a narrow-gauge line to Narngulu, and finally into Geraldton. Infrastructure is upgraded in incremental steps, but some of these incremental steps are already in place. The Port of Geraldton is limited to 14 million tonnes. The narrow-gauge line is going to Morawa. Now, at the most extreme point, there will be the Karara to Tilley line—the subject we are discussing this evening. This part of the infrastructure will enable early production for Karara and early realisation of royalties, but it also underwrites the bankability of the Oakajee port.
I remind members briefly—I think I understand this correctly—that Oakajee port is owned by the state of Western Australia. The commonwealth and Western Australia are investing equally in Oakajee port—roughly $336 million this forthcoming year. However, the planned standard-gauge railway line, which goes from Oakajee eastwards to the Jack Hills and Weld Range iron ore deposits, is owned by Oakajee Port and Rail. The interesting thing is that the Jack Hills iron ore deposit is also owned by the same shareholders as Oakajee Port and Rail—50 per cent by Mitsubishi Development and 50 per cent by Murchison Metals. The point I am getting to is that although the Tilley to Karara railway line is critically important, it must be taken in context. It must have the flexibility to ensure that as it gets to shipping iron ore—eight million tonnes the first year and perhaps another eight million the following year—it will quickly surpass 14 million tonnes so that it will have to get to Oakajee port. We know that Oakajee port is very close to having a bankability statement so that construction can begin. But the construction of that northern railway line is largely dependent upon Mitsubishi and Murchison Metals—as Oakajee Port and Rail—raising $5.5 billion to get Jack Hills up and producing. That is on top of the $3 billion to construct the railway line; $8 billion dollars is a lot of money in any man’s terms. If a slip between the cup and the lip occurs there so that the railway line is not built when we think it will be built in 2014, Karara will have a problem. It will have its entire infrastructure, it will have the jobs; it will have China waiting to receive the magnetite for further processing; and we will have a problem. The difficulty with this bill is not that it enables the building of the Tilley to Karara railway line—that is the easy part. It will come pretty quickly up to moving 30 million tonnes a year, but of course we know that Geraldton can take only 14 tonnes and that the rest will have to go to Oakajee. So, if Oakajee Port and Rail does not build that northern line in time, WestNet Rail will have to connect in with Oakajee somehow. At least I think we can say that Oakajee Port and Rail will build the standardgauge railway line from Oakajee south to Wokatherra Gap, which is not that far north east of Geraldton, and into that junction a connection between Narngulu. WestNet would build a line between Narngulu and Wokatherra Gap, which is only 30 or 40 kilometres—not a big distance. WestNet is ready and able to make that investment. Therefore we have some of the dominoes in place; we have the current narrow-gauge railway line in place; we have the port of Geraldton in place, although it is limited; and now we will have the Karara line in place.
HON KEN TRAVERS: It is capped, not limited.
HON PHILIP GARDINER: Capped, that is correct, Hon Ken Travers. The port of Geraldton is capped under the Oakajee Port and Rail agreement with the state. I have therefore discussed this matter with the minister who has assured me that, should there be a difficulty with Karara getting its ore onto a ship and on the way to China, enabling legislation can be presented to the Parliament to make alterations to the legislation so that the appropriate incremental improvement in the infrastructure will occur to allow that iron ore to get through to Oakajee. The only thing that worries me is that two owners of two different railway lines will need to interact. I am sure that if that were not the case, the outcome would be determined according to law. Any restraint of trade issues would be resolved through the legal processes and competition law. My main concern is that if the Oakajee port and railway line are delayed for one reason or another, can I take comfort from the minister that enabling legislation could be introduced to ship that iron ore, not necessarily on the WestNet line but by some means to get it to the Oakajee port.
The competition issues will take care of themselves.
HON KEN TRAVERS: How can we have Oakajee port if we don’t have Tallering Peak, Jack Hills and Weld Range operating at the same time?
HON PHILIP GARDINER: If they are not operating at the same time, it would perhaps further undermine the commercial viability of that northern lie. I am told that currently that northern line has nominations of 116 million tonnes per annum of iron ore. It is easy to write a nomination on a piece of paper, but it is harder to get it working in a productive mode to have iron ore shipped. I am very happy, along with my National colleagues, to support this bill.
