Gladstone Coal Port Cost May Drop From A$4 Billion, CEO Says

By Jesse Riseborough

Jan. 20 (Bloomberg) -- Gladstone Port Corp., manager of the world’s fourth-largest coal export terminal, said the A$4 billion ($2.6 billion) cost estimate of a planned expansion may decline because of falling costs for construction materials.

The cost “is under review because what we had seen during the last two years was a significant rise in capex and now we have already seen some significant reductions,” Leo Zussino, Gladstone Port chief executive officer, said today in a phone interview from Brisbane, Australia. “The guys are working on a review at the moment to get the costs of stage one down again.”

The cost of construction materials including steel has declined as the global recession forces mining companies to cut as much as $193 billion in spending, according to Credit Suisse Group AG. Prices for coking coal, which jumped to a record last year, may slump 63 percent this year as plummeting demand for steel curbs requirements, Macquarie Group Ltd. said yesterday.

BHP Billiton Ltd., the world’s biggest mining company, Rio Tinto Group and Xstrata Plc are part of a 16-company group that’s agreed to build the Wiggins Island terminal, scheduled to open by 2012. The port is located 525 kilometers (326 miles) from the Queensland capital, Brisbane. The group expected to secure financing for the project this year, the state government said last year.

“Whilst this uncertainty with respect to the short term outlook remains, I doubt whether they will make any decisions like” shelving development plans for the Wiggins Island coal terminal, Zussino said.

The Central Queensland Port Authority operates the port, which includes the Barney Point terminal and R.G. Tanna terminal. A A$780 million expansion of R.G. Tanna was completed last year, boosting its capacity by 30 million tons to 70 million tons.

The proposed Wiggins Island investment group also includes Anglo American Plc, Aquila Resources Ltd., Felix Resources Ltd., Macarthur Coal Ltd., Wesfarmers Ltd. and Cia. Vale do Rio Doce.

To contact the reporter on this story: Jesse Riseborough in Melbourne at jriseborough@bloomberg.net