Mitez 50 Year report Summary

MITEZ 50-YEAR FREIGHT INFRASTRUCTURE PLAN / SUMMARY REPORT / JULY 2012

Disclaimer This report has been prepared by Juturna Consulting for MITEZ. The information in this report has been prepared by Juturna Consulting from open source material and from stakeholder consultation.

Further details of the literature review, interviews and data input assumptions can be provided at the discretion of the client.

All reasonable attempts have been made to ensure the accuracy of the information contained in this report, but Juturna Consulting reserves absolute discretion in updating or amending this document.

Comments and questions: Mr Luke Fraser Principal, Juturna Consulting Pty Ltd P 0437 146 274 E juturnaconsulting@gmail.com W www.juturna.com.au Ms Tracey Lines Chair, 50-year plan project (MITEZ) P 0439 075 574 E tlines@townsville-port.com.au W www.mitez.com.au

design by xmarx xmarx.com.au

contents/ Mount Isa to Townsville: a supply chain of truly national significance

05

Understanding what the supply chain can really offer: commodity profile and demand forecasts

06

Dynamic modelling of demand for the region’s output

08

Growth projections: a region with commodities in demand

09

Infrastructure challenges in summary

10

First steps in a bigger planning process

14

Key recommendations for the future

14

04 > Juturna consulting / mitez 50-year freight infrastructure plan / Summary report / July 2012

Juturna consulting / mitez 50-year freight infrastructure plan / Summary report / July 2012 > 05

Mount Isa to Townsville A supply chain of truly national significance

The Mount Isa to Townsville freight supply chain stretches from Mount Isa in western Queensland - centre of one of the world’s richest and most prospective minerals provinces - eastwards through minerals and farming country to the tropical port and manufacturing centre of Townsville on the east coast of Australia. Its contribution to Australia’s economy and national interests makes it of truly national significance.

Fast Facts: the Mount Isa to Townsville supply chain • A $15 billion dollar gross regional value-added economy in 2011 • 2011 Townsville port traffic of over $8.5 billion value

• Big agriculture: over 1,900 farms across 30 million hectares, 2.5 million cattle, 9.5 million tonnes of sugar cane cut annually

• Comprises 20% of the land mass of Queensland

• Regional education, manufacturing and services hub

• Home to approximately 250,000 people; around 7% indigenous Australians

• 1,000 km from Mt Isa to Townsville – one of the world’s most remote supply chains

• One of world’s richest minerals zones - over 50 active mines, 250 ‘active prospect’ mines

• Geographically remote from state/federal governments: Townsville over 1,300km from

All statistics sources: ABS, ABARE, Queensland Department of Mining

Brisbane, over 2,100km from Canberra • Home to Queensland’s fastgrowing, third-largest city, Townsville • A Defence seaport, airbase and garrison of high strategic significance • Major tropical/outback tourism destination: Townsville adjacent to the Great Barrier Reef

06 > Juturna consulting / mitez 50-year freight infrastructure plan / Summary report / July 2012

Understanding what the supply chain can really offer: The MITEZ 50-year freight infrastructure plan has developed the most detailed public analysis of the commodity riches of the region and forecast growth in world demand for these products into the future. Armed with this unprecedented depth of information, industry, communities, investors and governments can take a strategic view of the major freight infrastructure planning and investment needs for the region’s future – making the right decisions at the right time.

Maximising growth tomorrow means good infrastructure planning and investment today This supply chain’s current $15 billion annual economy is forecast to grow to around $40 billion within four decades, based on world demand forecasts for the commodity mix of the region. But to take maximum advantage of the growth ahead, freight infrastructure must be planned well: the right investments must occur at the right time across the supply chain.

The region’s mine sites identified in Queensland Government data base Total sites (No)

Operational mines (no)

Active prospect sites (no)

Other sites (no)

Copper

91

12

69

10

Gold

105

7

66

32

Silver

6

2

2

2

Zinc

16

5

9

2

Tin

73

0

35

38

Nickel

8

0

8

0

Antimony

6

0

4

2

Limestone

9

5

3

1

Phosphate rock

15

1

10

4

Lead

3

0

3

0

Iron

6

0

4

2

Magnetite

2

1

0

1

Uranium

17

0

16

1

Major commodity produced/ available at site

Juturna consulting / mitez 50-year freight infrastructure plan / Summary report / July 2012 > 07

commodity profile and demand forecasts The region’s mine sites identified in Queensland Government data base cont’d.

Total sites (No)

Operational mines (no)

Active prospect sites (no)

Other sites (no)

Tugsten

6

1

4

1

Earthy lime

3

2

0

1

Gemstones

2

2

0

0

Stone etc

18

17

0

1

Gypsum

1

1

0

0

Vadium oxide

4

0

4

0

Perlite & silica sands

2

2

0

0

Oil shale

2

0

2

0

Flourite

8

0

4

4

Diatomite

2

0

2

0

Other

6

0

3

3

Total all DEEDI sites

411

58

248

105

Major commodity produced/ available at site

NB: Coal was not modelled from the geological survey database held by the Queensland Government and projections for this commodity in the North Galilee basin have been estimated separately, with the assistance of information supplied by coal proponents in their formal submissions to the Interim Report

08 > Juturna consulting / mitez 50-year freight infrastructure plan / Summary report / July 2012

Dynamic modelling of demand for the region’s output

Discrete aspects of the economy considered in the current MITEZ model REGIONS Queensland, Rest of Australia, Rest of the World

COMMODITIES Sugar cane, sugar beet Other crops Cattle Other animal products Fishery & forestry Coal Oil Gas Other minerals Meat products Other Processed food Manufacturing Electricity

Water Construction Trade Transport Communications Finance and insurance Other business services Recreation & other services Govt services Ownership of dwellings

The report forecasts were developed using a bespoke version of the Deloitte Access Economics model of the world economy.

The model has three regions and in each region production of 23 commodities was allowed for. The model tracks the demand and supply of the 23 commodities in the modelled economies over the period 2012 to 2050.

As detailed in the draft report forecasts of growth in value added by industry were generated by simulating changes in each region in regional gross domestic product, regional labour supply/working age population and regional population.

The gross regional value-added forecasts for the supply chain were then derived by applying the growth in value-added, by industry, (estimated for QLD in the Deloitte Access Economics dynamic general equilibrium model for the world economy) to data on value added for the MITEZ region obtained from work undertaken by the North Australia Research Group.

The Queensland Office of Economic and Statistical Research (OESR) highlighted several areas where the modelling framework could be improved. These suggestions were largely adopted for this final report.

Juturna consulting / mitez 50-year freight infrastructure plan / Summary report / July 2012 > 09

Growth projections

A region with commodities in demand The supply chain’s forecast gross regional value added economy 2010-11 to 2049-50

010 > Juturna consulting / mitez 50-year freight infrastructure plan / Summary report / July 2012

Infrastructure challenges in summary The 50-year plan draws not only on economic analysis, but also on professional investigation of the region’s freight task and infrastructure challenges. This was in turn supported strongly by feedback from freight users, owners and the communities via a formal public submission process. These efforts made clear the major challenges to the supply chain Much physical freight infrastructure is ageing and in places outdated The roads, rail and port all face challenges to existing infrastructure:

Rail The line to Mount Isa is gradually being resleepered, but train management and communications systems are outdated; together with passing loops constraints, these factors limit train path availability and freight throughput.

Existing rail lines to the port travel through the city and can become congested at the port;

Port Some loading and unloading facilities are out of date, some berths are congested but others are underutilised, leading to low berth occupancy rates overall and lessthan-efficient train path allocations; access to the port at full ship loads is limited to Handymax class vessels, with larger Panamax vessel access very restricted

Roads Are under pressure from significant traffic levels and the effects of extreme heat and rain; cattle and mining freight safety and productivity is reduced by the condition of some critical road networks and higher productivity access arrangements could be made available to the railhead and port.

Juturna consulting / mitez 50-year freight infrastructure plan / Summary report / July 2012 > 011

Infrastructure development approval processes and timelines slow and haphazard A consistent theme in the feedback from freight owners, users and investors in the region was that development approval processes on this supply chain have been too slow, too haphazard and inconsistent. State government approaches to managing the major projects that will drive this supply chain have not always been successful in the past.

Public amenity, safety and environmental sustainability outcomes can improve

Private investment in freight infrastructure is at very low levels Private infrastructure investors need certainty that existing infrastructure is working at capacity before major new investments and efficiencies can be pursued with confidence; equally, the reliability of service is crucial to freight users. The supply chain is not at present in this position and this, along with regulatory and development approval challenges and some lack of joint behaviour from rail and port users has perhaps dissuaded major private capital investment in this supply chain in the past.

The supply chain is home to around 250,000 people as well as to nationally and even internationallysignificant environmental areas such as the Great Barrier Reef. Economic prosperity is welcomed, but freight development must incorporate the needs and aspirations of local inhabitants and their environment.

Strong feedback from local government and community representative groups suggests that the supply chain needs to find a place for public amenity and environmental sustainability matters. A new approach will see local industries and communities taking more control of their supply chain. This extends to amenity and sustainability being partners in economic development from the earliest stages, in a coordinated and collegiate fashion. In all of this, creating a protected “place for freight� is a vital foundation for success.

012 > Juturna consulting / mitez 50-year freight infrastructure plan / Summary report / July 2012

Adapting to a changing future freight task can mean different infrastructure choices ahead The commodity profile of the supply chain suggests that the future may see a shift in logistics planning and investment to more bulk commodities such as iron ores (haematite and magnetite) phosphate rocks, shale oil and coal. This will require different thinking about freight infrastructure from the current high-value, low volume mineral concentrates of this supply chain. This thinking might need to include a future role for the nearby deepwater port of Abbott Point, 80 kms south of Townsville, as an alternative destination servicing the Mount Isa supply chain via a rail link. The natural expansion zone for the supply chain at the port end – the Townsville State Development Area – is a strategic asset that has not been planned for strategic and timely development in the past.

It must play a well-planned role in the region’s future.

More effective regulation of rail and port will drive greater efficiency, a clearer understanding of total freight capacity and therefore attract stable new investment The current supply chain is highly complex, with dozens of very different product lines using the port, road and rail. The port is not at present regulated, meaning there is little transparency for customers, users and owners of the true capacity of the supply chain from mine to ship, and how this capacity can be used most efficiently. A new model of supply chain coordination and capacity reporting is required to drive growth and attract new infrastructure investments at lower risk to the investors. This might include a much more transparent understanding of the cost, condition and remaining useful life of key pieces of freight infrastructure in port road and rail and a more transparent customer understanding of true freight capacity on rail and at port.

Juturna consulting / mitez 50-year freight infrastructure plan / Summary report / July 2012 > 013

Planning and investment needs to be led more by the local industries and community, with higher government assisting local objectives In the past, State and Federal governments have tended to plan for and fund most infrastructure investments in this supply chain. In the future, tax revenue constrains mean public funding for these freight investments will be harder to secure and scarce public funds are unlikely to meet all of the freight infrastructure needs of this supply chain in future.

Not enough coordination, transparency and joint user behaviour in the supply chain Investment in the supply chain’s key freight infrastructure has languished in the past because not enough mining and agricultural users of the infrastructure have acted in a joint way to maximise joint use of public-owned assets like the rail and port. With a thorough profile of the commodity promise of the region now available through this 50 year plan, this can change: infrastructure planners and investors should begin to work with groups of miners to build longer-term and larger scale freight infrastructure investments and reforms than any single miner can command. Doing so should lower barriers to entry for new businesses and expand the wealth generation of the region.

It makes sense for industry and the local community to establish a coordinated approach to managing total freight capacity and efficiency in this supply chain, so as to attract more private capital to this infrastructure in future, at lower levels of investor risk.

Governments can assist this goal by providing more certain and practical regulation and development approvals in the supply chains. ‘Led by locals and assisted

by State and Federal governments’ is the motto of this supply chain’s new approach.

014 > Juturna consulting / mitez 50-year freight infrastructure plan / Summary report / July 2012

First steps in a bigger planning process This freight infrastructure plan is intended to be the first of several strategic plans for the region’s economic and social infrastructure –all developed by local industries and communities

with assistance from State and Federal governments. Energy, water and workforce skills are all major challenges to how strongly this region will grow and support national productivity. MITEZ intends

to develop similar 50-year plans for these key areas, so that the region– will plan better for the future and offer more reliable infrastructure investment opportunities to private and public investors alike.

Key recommendations for the future The MITEZ 50-year freight infrastructure plan offers 26 detailed recommendations to governments, in order to meet and resolve the key challenges facing this supply chain. The major themes of these recommendations can be summarised as follows: 1. Establish a supply chain coordinator which is independent of the road, rail and port infrastructure owners, in line with best practice approaches to complex supply chain coordination elsewhere 2. Develop better, more market-responsive regulation of key public freight infrastructure in this supply chain 3. Active government ‘case management’ of the most strategic development applications 4. State government to maintain and update the commodity data and demand forecasts for the region’s freight 5. Create better structures for Defence, environment and public amenity objectives to be met in the supply chain 6. Open for business: pursue greater private infrastructure investment in better projects 7. Develop a board structure comprising freight industry and community leaders to implement the necessary reforms in partnership with governments and ensure that productivity and safety goals stay paramount 8. Work with the Queensland Government to align available Royalties for Regions funding with the most practical and pressing development tasks ahead for this supply chain