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Esperance port expansion under cloud: QR
Esperance port expansion under cloud: QR

Mining rail operator QR National has cast doubt on the ability of Yilgarn iron ore juniors to underpin a major expansion of Esperance Port, just days after mid-tier magnetite play Jupiter Mines axed its $1.7 billion venture in the region.

Speaking after unveiling a $125 million upgrade of its depot and rolling stock in the southern port town, QR's head of WA operations Ken Lewsey said the Esperance expansion would be a tough ask in the current volatile business climate.

"It (the port expansion) is quite a step cost change," he said. "To do that we have to have some customers that have the gravitas to underwrite it.

"This region has a dozen players who have put their hand up, but a lot of those guys have only got two or three million tonnes for five years.

"You have to look for guys who can underwrite the project with 10 or 15 million tonnes for 15 years to back that sort of investment."

Mr Lewsey said the junior miners, including Jupiter, would be welcome on any rail solution, but Esperance's fate would rest in the hands of Chris Ellison's bigger Mineral Resources and US giant Cliffs Resources.

QR is already hauling about 11 million tonnes a year of iron ore through Esperance for Cliffs.

The State-owned Esperance Port recently completed a market- sounding exercise for a possible expansion to 20mt a year, but has been criticised by junior miners such as Cazaly Resources and Cashmere Iron for unduly delaying the project.

Stage one was meant to open next year but looks like starting in 2015 at the earliest.

Mr Lewsey and QR's overall chief executive Lance Hockridge were positive, however, on the long-term outlook for regions such as Esperance and the Mid West centred on Oakajee, where it also operates.

Mr Hockridge rejected suggestions from Woodside Petroleum chairman Michael Chaney yesterday that Australia was headed for a "growth cliff" in 2015 when the mining investment boom ended.

The QR chief said this was because Asian demand would prevail.

However, Mr Hockridge said Australia had been presented with a golden opportunity in the current slowdown to restore costs to a more sustainable level, which would help foundering projects.

"At the height of the boom people were much more concerned about getting the tonnes out than the cost," he said. "We are now entering a phase which is much more about being competitive.

"Maybe one of the silver linings, however, of the economic circumstances at the moment is that some of the cost heat has gone out of some of these critical developments. So hopefully we will see a return to something that is more sustainable."

A lot of those guys have only got two or three million tonnes for five years. "

Ken Lewsey

The reporter travelled as a guest of QR National