Perth (Platts)--4Feb2013/541 am EST/1041 GMT

Australian railway operator Aurizon, formerly QR National, said Monday it expects to re-open its Blackwater coal line in central Queensland by end week following severe flooding from ex-tropical cyclone Oswald last week.

The severe weather caused Bowen Basin miners like Rio Tinto, Wesfarmers and Jellinbah to declare force majeure after the Blackwater and Moura rail networks were impacted.

Damage assessments to both networks have started as floodwaters have begun to recede. The smaller Moura system will return to operation in stages over February 18-25.

"Repairs have commenced and at this stage we expect the Blackwater system to reopen by the end of the week," said Mike Carter, executive vice-president for Aurizon's, formerly QR National's, coal networks.

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A section of the Blackwater railway west of Duaringa has now reopened, but 2 kilometers (1.24 miles) of submerged track between Edungalba and Duaringa has sustained damage, the company said in an update on its website.

Blackwater has a capacity to rail 58 million mt/year of coal exports from 14 mines to Gladstone port, according to Aurizon's website.

The Moura network, which serves Anglo American's Callide and Dawson coal mines and Cockatoo Coal's Baralaba open-cut operation, closed January 25, while the Blackwater line, serving a string of mines in central Queensland, closed January 26.

Several sections of the Moura system have sustained track damage, including 3 km of earthworks washed out between Stirrat-Clarke and Earlsfield approximately 40 km from Gladstone port, and some track will need replacing.

"Given the extent of the damage in these areas, we are expecting to open the Moura system progressively west from Boundary Hill from February 18, with the last section impacting mines at Baralaba and Moura not to open until February 25," Carter said in the update.

The Moura system carries about 12 million mt/year of coal from five mines to customers including local power stations and Gladstone port.

Carter said initial reports were that the damage to Aurizon rail lines was not as bad as during floods in 2011, and he stressed he was confident coal producers would be able to recover lost railings.

"The majority of mines have not been as severely impacted as in 2011 and have been able to continue operations and stockpile tons," he said.

FORCE MAJEURES REMAIN IN PLACE

Rio Tinto's 80%-owned Kestrel mine, which produces 3.8 million mt/year of coking and thermal coal, remains under force majeure because of damage to the Blackwater rail system, a company spokesman confirmed Monday.

Rio Tinto declared force majeure on coal sales contracts for Kestrel on January 30, and at the time stressed its other export coal mine in Queensland, Clermont, was unaffected by the closure of Blackwater.

Xstrata declared force majeure on a number of coal shipments from Gladstone port on January 29 because of flood damage to the Blackwater rail system, and a company spokesman confirmed Monday this was still in place, and that it was in close contact with Aurizon.

Xstrata's 75%-owned Rolleston export thermal coal mine, which lies at the end of a branch line off the Blackwater rail system, 423 km from Gladstone port, is also understood to be still affected by the Blackwater suspension.

Commonwealth Bank of Australia analysts said in a January 30 report that the impact of last week's flooding on Queensland coal exports was likely to be much less than the flooding of 2011.

"If we assume a two-week delay of coal production and shipments due to the rains, we estimate that 3.5 million mt of exported coal (thermal and coking) will be impacted," Lachlan Shaw and Vivek Dhar said in the report.

"This is a much smaller cut in supply than the 15 million mt of seaborne coal lost after cyclones ravaged Queensland in early 2011, which saw coking coal prices surge 45-50%."

Shaw and Dhar said the risk of mines declaring force majeure was dependent on whether stock levels at port could keep producers delivering on contract, and whether rail congestion could block coal from reaching port.

Platts contacted Gladstone Port Corp. for details of its current coal stockpile levels, but officials were not immediately available for comment.

--Mike Cooper, michael_cooper@platts.com
--Edwin Yeo, edwin_yeo@platts.com
--Edited by Wendy Wells, wendy_wells@platts.com

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