Aurizon vision shunts to a standstill

Does anyone remember Lance Hockeridge of Aurizon and his heroic mission to build Comrade Colin’s West Pilbara vision, as well to build Comrade Campbell’s Galilee boondoggle? Today, it’s not just West Pilbara and the Galilee that have run off the rails but suddenly existing Aurizon contracts are also in peril, from UBS:

Iron ore haulage accounts for c.10% of group earnings
With iron ore risk spreading through the market it is worth revisiting Aurizon’s exposure. The company is currently annualising $330m of revenue and $110m of EBITDA (11% of FY16E group pre-tax profit) using $430m of assets (4% of group) on four haulage contracts with high cost junior miners. Customer concentration risk is a concern, with two customers (Cliffs and Karara) accounting for c.90% of the earnings, and the parent companies both being foreign domiciled. While these parents appear willing to continue producing at the current low price (and our forecasts assume the status quo) we believe the possibility of Aurizon’s take or pay protections being tested in the near term remains a risk. We note Aurizon has not disclosed whether contract obligations extend to supporting facilities from parent companies.

I have no idea why Cliff’s hasn’t yet shut but it surely will, it is higher cost than Atlas. Gindalbie is also very expensive though has the advantage of Chinese sponsorship so may survive a while longer.

Comments

  1. Forget about that… imagine if a whole lot of coal mines suddenly shut within the next three or so months!!! (Hypothetically of course) Imagine the number of contracts termed null in void!!!! This company would effectively be bust…

    Bugger… that was a good float and done at exactly the right time – credit should be given for that, for the tax payer did very well. Ironically, when the government eventually has to rescue this entity, it will do even better (in the long-run) for getting the asset back for virtually nothing.

  2. Isnt this just beautiful, it was the costs, charges and fees from companies like Aurizon and Genese and Wyoming (owners of the Adelaide to Darwin line) which prompted me to design my own track.
    As it turned out , a much better system than is currently used,standard gauge, heavy freight, 50 tonne bogie loads, and more profitable, on a global basis, than any mine in Australia I could have got my hands on. Thanks Lance, and all your wanker mates. WW

      • Burb, the Intellectual property resides in the method of manufacture of the track components (and the associated advantages arising therefrom) and the method and manner of the construction of the formation and the installation-of the track components (and the associated advantages arising therefrom) and the method and manner of maintenance for the track components.
        The track components are not a radical advancement from anything existing rather different applications of techniques to achieve the same function. One of the results of that is that automation can be extensively applied to the manufacture of the track components.
        The end result is a very simple method of manufacturing and installing rail track.
        You will probably see it first used here in the rail line from Brisbane to Melbourne.
        Because of its global application, I hope to JV with an international company such as Caterpillar, as GPS guided earth-moving equipment is fundamental to the construction of the formation, and US companies and US railroad companies are better equipped (have a track record) in installing rail infrastructure. Although the Chinese are catching up fast, But getting railroads in is a man’s work, and the US has a (better attitude to getting things done than most others).
        The parent co and the ownership of the technology will reside offshore.
        I had the opportunity to get the line started a couple of years ago, but then it became apparent that reason had gone out the window in construction is Australia, and the project has been on ice since.
        (the mineral deposits it was designed to access are still there and are more valuable every day)
        Thanks for your interest.WW

  3. The whole flamin country went off the rails years ago. Let Aurizon the company go bust, then the government should nqtionalise it out of nqtional interest. No compensation for the suckers who bought into its shares: There: Fixed:

    Oz; still in full retard ahead mode as the good Lord Duds reminds us:
    Catching another high speed train here in Europe tomorrow. Cheers