Railway costs burdening growth for region’s resource sector

A railway’s unusual fee arrangement is blocking mining potential, as a phosphate company CEO lists the exorbitant costs that put regional jobs at risk.

Centrex CEO Robert Mencel stands in front of the phosphate rock processing plants at Ardmore near Mount Isa. The company is seeking funds to be able to expand on it.

A costly railway owned by the state government is being blamed for a chain of financially struggling junior mining projects, as a phosphate company chief executive lists the exorbitant costs that are putting regional jobs at risk.

Phosphate company Centrex is the fourth junior company in the North West Minerals Province being threatened financially in as many months.

Centrex is at risk of halting mining development at its Ardmore project 120km south of Mount Isa unless it can raise $10.4m to expand its phosphate plant to increase its profitability margins, after racking up $17m in logistics costs with freight operator Aurizon.

This would impact 50 full-time direct jobs on-site but another additional 100 contractors.

Centrex chief executive Robert Mencel said the company was desperate to expand and drive down its costs, and that part of its issue had been transporting high bulk and low value product in a remote region since it had been operating the past two years.

The phosphate rock processing plant established by Centrex at Ardmore.

Mr Mencel said 70 per cent of the company’s operational costs were in transporting its phosphate to the Townsville Port, a third of which were government related charges.

These fees included payments to Queensland Rail to use the rail corridor and to the Department of Transport and Main Roads to use public roads, as well as costs to use the port.

And royalty fees were not included among these costs.

He said the Mount Isa to Townsville rail corridor’s pricing was uniquely structured in that costs were not subsidised by the government and were paid for entirely by customers, and divided per tonnage.

An Aurizon train travels on the Mount Isa rail corridor to transport product to the Townsville Port. Picture: Scott Radford Chisholm

When customers were scared off from using the railway because of the costs, it then passed the burden onto the remaining users.

“That’s unfortunately almost a recipe to a spiralling bathtub type of arrangement where water is going to go down the sink,” Mr Mencel said.

“Even now it’s probably just as cheap for us to truck the product to Townsville as it is to put it on the rail line.”

An aerial view of Quayside Terminal at the Port of Townsville. where products from the North West Minerals Province are exported from.

He urged the state government to subsidise junior miners to encourage them to use the railway line and therefore cheapen the cost per tonnage.

Three junior copper mines stopped its operations late last year within the neighbouring Cloncurry Shire late last year, which its mayor Greg Campbell warned would affect about 400 jobs and would leave debt to the town’s businesses.

These mines were True North Copper, Copper Resources Australia, and Chinova Resources, while up to 1200 jobs were expected to be lost in the closure of Mount Isa Mines’ copper operations.

The issues contradict the state government’s positive messaging about the region which had more than $500bn in critical mineral deposits including copper, zinc, and vanadium.

Regional advocacy group Mount Isa to Townsville Economic Zone chief executive Maria James said the supply chain within the region was “nuanced” and that a solution to protect junior miners was to transport more product on the railway for both directions.

“There are quite a number of junior copper miners in the North West but their existence is always precarious because of the big costs upfront,” she said.

“We need a better way of looking out for the juniors.

“Perhaps the government can look at ways to share the risk between the state and the mining proponent, rather than zero risk to state.”

Resources Minister Dale Last said the government was streamlining approvals and established a resources committee to address the industry’s challenges.

While he focused on Mount Isa Mines’ job losses slated for July, Mr Last said there were several new potential mining prospects that could be established within the next four years.

“There’s a lot of work being done in that space at the moment and we want to make sure that community remains sustainable and ready to go when those mines come online,” Mr Last said.

Originally published as Railway costs burdening growth for region’s resource sector