QR National has awarded Abigoup the infrastructure contracts for the massive Wiggins Island Rail project in Queensland, but market concern over the future of Xstrata's Wandoan coal mine may put the coal terminal at risk.
Worth around $76 million, the contract will see Abigroup carry out civil works for the 13 kilometre balloon loop near Gladstone, where coal trains will be unloaded at the coal export terminal.
According to QRN network executive vice president Michael Carter this is the first major contract for the rail project's development, which will start operating in mid 2014.
"The signing of this contract is a significant milestone for the project, and means Abigroup can hit the ground and have earthworks underway in the coming weeks," Carter said.
The balloon loop is one of six key worksites for stage one of the rail project.
The five are the Rocklands to Stanwell Duplication; Dingo to Bluff Duplication; the Moura East upgrade; the North Coast Line upgrade; and the Bauhinia North Branch upgrade.
Abigroup is also working on a joint venture with Lend Lease to construct the terminal itself.
Worth approximately $290 million, the project involves bulk earthworks and civil works for the coal terminal at Gladstone.
QRN initially signed the contract to construct the $900 million Wiggins Island Rail Project in September last year.
All of the remaining infrastructure will be completed by March 2015.
The rail project is designed to support the initial 27 million tonnes of coal that will pass through the Wiggins Island terminal at Gladstone each year.
While QRN has reached an agreement with Xstrata Coal, Aquila Resources, Bandanna Energy, Caledon Resources, Northern Energy, Yancoal, Wesfarmers Curragh, and Cockatoo Coal, for the construction of Stage One of the rail infrastructure, it is believed that Xstrata may not sign up to the second stage of construction.
The miner is reportedly facing pressures caused by its growing $6 billion Wandoan coal projected in the Surat Basin, according to the Australian.
Xstrata has already been allocated capacity along the rail line, however its upcoming merger with Glencore has the market unsure of whether the Wandoan mine, and the need for rail and port capacity at Gladstone, will still be part of Xstrata's future.
"We believe that Xstrata may decide not to take up its 22 million tonnes a year of port allocation at WICET stage 2, thereby delaying the development of the Surat Basin until 2017-18," Credit Suisse's Paul McTaggart told the Australian.
"We also understand that Glencore is opposed to large-capex, greenfields projects in this current environment."
If Xstrata pulls out of the second phase of the port's development it well be a major blow for Wiggins Island, and the second time this year that a major miner has pulled out of a port development in the region, after Rio Tinto withdrew from the Abbot Point Coal Terminal expansion in April.