AN EXPORTABLE INDUSTRY

2013 Heavy Haul Rail Conference Newcastle

OBJECTIVES

The objectives of this presentation are to:

Quantify the achievements of our industry

Propose the concept of “super” clusters as export

leaders.

Outline potential products for export

Prioritise target customers

Propose a roadmap

WORLD’S BEST HAULAGE RECORDS

The highest tonneage heavy haul networks in

both narrow, and standard gauge.

Aurizon 180 Mtpa

Rio Tinto 253 MT 2012/3 Target, Up 6% H1

2013/4

Plans 360 Mtpa by early 2015

BHP 170 MT 2012/3, Target 207 MT 2013/4

Fortescue 82 MT 2012/3, Target 130 MT 2014

WORLDS BEST ENGINEERING

Standard Gauge (Iron ore)

The longest revenue trains (3 km +)

The heaviest trains in the world (38,000 T)

The highest axle loads (40 TAL)

The lowest costs/tonne/km (CIC)

Narrow gauge (Coal)

Largest coal tranport from mine to port

Upgrading axle loads, train lengths, technology

Massive capacity upgrade – approx 20 times

INDUSTRY CLUSTERS

Definition

Industry clusters are groups of similar and related firms in a defined geographic area that share common markets, technologies, worker skill needs, and which are often linked by buyer-seller relationships.

Firms and workers in an industry cluster draw competitive advantage from their proximity to competitors, to a skilled workforce, to specialized suppliers and a shared base of sophisticated knowledge about their industry.

“SUPER” CLUSTERS

Nation Near Monopolies Key

Switzerland Luxury watches Precision engineering

Italy High fashion, Supercars Design

France Wine, Tourism, Food Marketing

Germany Cars Engineering

China Consumer goods Cost - economies of scale

Australia Bulk resources Availability – reducing

“SUPER” CLUSTER FACTORS

A “super” cluster of national industry must be deep, export oriented, innovative, and value adding

“Super” clusters are perceived as world’s best by nationality first and product second eg Swiss watches, German cars

Australian heavy haul rail qualifies on all counts in its own niche

While other countries developed their “super” products over decades, ours will need planned national development in today’s world.

DEPTH OF INDUSTRY

Safety, health, environment, quality management

Proven feasibility, economics, approvals, gov’t relations

Lead innovators – (Automation, remote control centres, etc)

Remote area preparation, early procurement, logistics

Proven contracting strategies

Proven engineering, operational standards and procedures

Proven competition and multi user agreements

Precision engineering – procurement, construction, maintenance, operations

Proven capex and opex cost improvement

Differentiation by multi discipline framework - logistics, engineering and operation

POTENTIAL MARKETS

China transports massive quantities of both iron ore and coal.

Africa has massive mineral deposits needing transport solutions. There are existing lines and ports just requiring upgrading

Indonesia has huge coal deposits requiring efficient transport – rail and port

Russia/Mongolia/Tibet/’stans. Minerals near China

CURRENT EXPORT ACTIVITY

Several Australian rail, port, and mining consultants are working in these markets

Austrade is now preparing marketing material for rail

Worthy progress has been made

The next steps include empowered leadership, a business plan, a goal driven program, and support

Support from companies, government, industry bodies, universities, research centres, professional bodies, and most importantly, industry leaders will keep us in the lead.

The window is not going to be open forever

THE FUTURE

Both iron ore and coal “low hanging fruit” has been picked.

Future mines will be further from ports, have higher strip ratios and lower quality product, face greater approval and land acquisition costs and times, and/or face higher sovereign risk.

Ports will be shallower or cost more for dredging or very long jetties to access deep water. Barging will become more common.

Rail corridors and their capex and opex will in future dictate whether mines will be developed.

Multi owner/user rail, or one owner multi mine rail will become necessary to combine mine outputs and obtain economies of scale

The capacity of heavy haul rail lines, especially single lines, will need to be pushed to the limit with every tool at our disposal in financing, management, above and below rail engineering, technology, operations, scheduling, control, operations, and reliability.

Australia has an innovative heavy haul industry which has thirty years of experience in increasing capacity and reliability of heavy haul rail.

RECOMMENDATIONS

Better incentives through tax breaks for “super” clusters of export industries.

Reduce barriers to entrepreneurship and outside venture capital

Increase funding and support for education and training

Develop a Heavy Haul Cluster Steering Committee?

Develop goals, plan, program, and resources

CONCLUSION

The Australian mining industry has picked the low hanging fruit.

Mines are now further from the coast, have lower product quality, higher strip ratios or underground, face higher approvals hurdles, and greater sovereign risk

New export industries are needed to maintain our competitiveness and our lifestyles

Heavy haul rail is such an industry.

Brian Marsden

Director: TRAC Services Pty Ltd

General Manager: AQES Pty Ltd

Ph: +61419544432

Email: bmarsden@outlook.com

QUESTIONS?