Australia’s Top Freight Rail Operator in Talks to Add Coal Port

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Source: Bloomberg Markets

Aurizon Holdings Ltd., Australia’s biggest rail freight operator, is in talks to acquire the Wiggins Island Coal Export Terminal as part of a deal that would help it secure long-term volumes and boost cargoes from one of the country’s mining heartlands.

Brisbane-based Aurizon would acquire the WICET facility in Queensland state as part of a wider deal that would see consortium partners seek to add one or more of the port’s source coal mines, the company said Monday in a statement. Brookfield Asset Management Inc. and Macquarie Group Ltd. would add mines owned by Glencore Plc and Wesfarmers Ltd. under the A$4 billion ($3 billion) plan, the Australian Financial Review reported earlier.

Glencore is receiving strong interest in its Rolleston thermal coal mine in Queensland, and is seeking to complete a sale in the first half of 2018, the producer said in a statement. Wesfarmers didn’t immediately respond to a phone call seeking comment. Brookfield didn’t immediately respond to an emailed request for comment outside usual office hours. Macquarie declined to comment.

Acquiring WICET would be a potential positive for Aurizon in allowing the company to diversify its rail haulage business given the terminal’s “strategic fit, potential growth profile and quality of infrastructure asset,” RBC Capital Markets analyst Paul Johnston said Monday in a note.

Aurizon declined 0.1 percent to A$5.215 at 3:28 p.m. in Sydney trading, trimming its advance this year to about 3.2 percent.

The WICET facility, owned by a group of coal producers including Glencore, provides as much as 27 million tons of coal export capacity a year, including about 16 million tons under long-term agreements, according to the port’s website. Expansions would allow the terminal to offer about 120 million tons of export capacity, the website says.

Aurizon’s proposal would seek to spur an expansion of volumes “through restructuring and the proposed introduction of lower, market-competitive port charges,” the rail operator said in its statement. Discussions are at an early stage and there’s no guarantee of any deal, the company said.

Peter Grauer, the chairman of Bloomberg LP, is a senior independent non-executive director at Glencore.

Source: Bloomberg Markets