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Emerald fundamentals to provide Capital Growth + High Rental Yields

Terry Ryder of hotspotting.com.au lists the Queensland town of Emerald as one that their market research demonstrates the potential of Capital Growth + High Rental Yields and comes in as one of the Top 10 Best Buys in 2013

Current Situation

Emerald is located in northern Queensland and only 270km west from the strong growing city of Rockhampton. Situated in the Galilee Basin with a current population of 17,000 up from 14,400 in 2004 and projected to grow significantly as more Resource Projects begin construction and move into production phase

Emerald is the key service centre for the district’s coal mining and agricultural industries, having taken over this role from the Bowen Basin to the East and other farming industries producting grapes, cotton, grain and citrus in the North East district

Mining continues to be the biggest industry sector in the region in terms of providing jobs with mining at 22%, construction 11%, agriculture 11% and retail 8%

Future

Emerald will continue to demonstrate ongoing growth with the emergence of the Galilee Basin and the recent amalgamation of Emerald Shire Council with Peak Downs, Bauhinia and Duaringa to form the cost effective and function Central Highlands Regional Council and commitment to investment of the projects listed below

Projects

Hancock Coal

When Federal Resources Misister, Martin Ferguson officially opened the test pit in November 2010 he said Hancock’s Alpha and Kevin’s Corner projects were “trailblazers” with the potential to rival the nearby Bowen Basin and the Hunter Valley in NSW.

Hancock has mining reserves of 8.59 Billion Tonnes and Alpha $7.5 Billion Tonnes. Alpha alone will employ 3,740 people during constructin of the mine and the 500km rail link and then provide 2,525 permanent operational jobs

Hancock will export 20% of Australia’s current coal exports

GVK Power and Infrastructure Group of India to take a major stake in Hancock mines, railway line and port projects. The group which runs airports and builds highways in India said the coal was needed for new power plants and will become a major buyer of Hancock’s coal; thus willing to pay $1.3 Billion for the mines and a further $900 million to develop the infrastructure. The rail project has been declared an “infrastructure Facility of Significance” by the State Government

GVK is also taking a 79% stake in the $10 Billion Alpha and Alpha West Coal projects and a 100% stake in Kevin’s Corner project followed by a 100% stake in the rail and port infrastructure linking the coal projects

GVK’s investment will propel the mines to successful development and ongoing operatoins for decades with the 3 coal projects expected to supply around 84 million tonnes per annum to the global coal market. GVK announced and signed in October 2010 a multi-billion-dollar deal to build a $3.6 Billion export terminal at Abbot Point with a capacity to handle 60 million tonnes – with a total ‘pit to port’ cost of $10 Billion

 

Waratah Coal

Waratah Coal owned by billionnaire Clive Palmer claims output of the mine will got to China in a deal worth $60 billion over 20 years on the back of China’s Exim Bank increasing its contribution to $6.8 Billion while Chinese state-owned enterprises will put in a further $600 million

Waratah Coal will build their own railways from the Galilee Basin to Abbot Point for export purposes. The proposed open cut mine could have resources of 4.3 Billion tonnes with first productin targeted for 2015 crating 6,000 jobs during construction and generating $4.6 Billion in annual export revenue

 

Adani

Adani Enterprises of India announced a $10 Billion project controlling every step from mining to ultimate destination of exporting the coal to Indian power stations owned by the company

A coal mine in the Galilee Basin and a $3 Billion railway network to transport the coal to 2 ports with one near Mackay and the other at Abbot Point in a $1.9 Billion deal with the State Government. Making Adani, India’s largest single investor in Australia with confirmation to proceed announced in September 2012

The aim is to export 60 million tonnes of coal to India by 2020 based on controlling mining to meet massive Indian demand for the consumption of Coal

Carmichael has a coal deposit of 10 billion tonnes and is reported to be tthe largest single coal tenement in the world with first shipment of coal in early 2016 and all approvals to be granted by mid 2013 allowing constructin to start by end 2013

Adani have announced to join forces with the QLD Government to create an apprenticeship scheme to help train the 5,000 workers needed for its coal project

Meijin Energy

Meijin Energy of China announced in June 2011 their plans for a multibillion dollar thermal coal mine in the Galilee Basin; that will rival Clive Palmer, Gina Rihehart, India’s Adani and Brazilian giant Vale – as reported in The Australian in June 2011

Operating in Australia as Macmines AustAsia, Meijin Energy outlined its first coal resource at what it is calling the China Stone project with resources at 3.7 billon tonnes of thermal coal

Planning to export between 30 and 60 mega tonnes per annum from late 2014, dwarfing Australia’s biggest operating black coal mines BHP Billiton’s Blackwater and Goonyella mines which produce around 14mtpa of coal

 

Xstrata

Xstrata plan an expansion of its Rollerston mine north of Miles for a planned $6 Billion coal mine and rail project covering a further 8,895ha to include 10 new open cut pits creating 600 new jobs amid reports of securing a major coal supply deal with Japanese power company Tohoku

 

AMCI

AMCI and Alpha Coal plan for a $4.2 Billion coal project near Alpha that will create 2,900 jobs if it went ahead with an estimated life line of 33 years, producing up to 17mtpa 170km west of Emerald

 

CSG in the Galilee Basin

Coal Seam Gas projects continue to strengthen in the Galilee Basin and in the evergrowing city of Gladstone with Chinese National Offshore Oil Corporation (CNOOC) making a $50 million investment in exploration permits held by Exoma Energy with their 4th well to be drilled in their program targeting both the Toolebuc Shale and the Permian Coal Measures

Mitsui of Japan has taken a 49% interest in its two Galilee BasinCSG exploration areas with Australian CSG explorers AGL and Origin having also farmed in on their exploration into the Galilee

Comet Ridge Limited is working in teh eastern basin nearby several large mines that are also being planned for with the possibility of CSG powering these coal mines – Comet Ridge announced in October 2012 that a 3 well drilling program had started

Connors River Dam

The proposed $2.6 Billion Connors River dam and pipelines project is planned to deliver water to the Bowen and Galilee basins and also to the central QLD townships of Nebo, Moranbah and Alpha

Housing

Between 2004 and 2007 Emerald experience high growth on the back of the upturn of the resources boom; 2008 – 2009 the market remained steady

The last 12 months has once again demonstrated strong growth and buying activity with the median house price up 11% and the long term growth rate sitting at 13% per year for the last 10 years

Rental Yield demonstrates a gross median of 7% as per REIQ figures; and 8% as per Australian Property Monitors

Agents in the area confirm a 3 bed fully furnished home achieving 14% rental yield setting the standard for furnished homes for Investment Purposes

Units in Emerald have demonstrated a 17% return over the last 12 months

Alpha vs Emerald

Alpha is 170km drive to Emerald which takes 2.5 hours to commute resulting in management personnel moving their families into Emerald  whilst they work in Alpha and commute home on weekends – exacerbating the growth of Emerald. Emerald has a major airport through wich much of the traffic generated by the coal projects will flow and will become the regional centre most likely to thrive from the development of the Galilee Basin resources

Emerald’s population will naturally grow even on the back of Fly in – Fly out workers

Alpha is also expected to grow even though 90% of the workers could be Fly in- Fly out. Currently Alpha has 140 houses and is expected to grow to 700 new homes in the coming years – with the East side prone to flooding it is projected that development will take place in the West

 

Summary

Emerald will grow in population size on the back of committed dollars being invested in the above projects

Investment in Property should always be underpinned by certain fundamentals such as : Jobs, Infrasctructure, Population Growth, Investment by industry, Investment by Government, longevity of projects, ect … and Emerald looks set that this will occur with median house prices and rental yields set to rise as industry moves forwards

Emerald might not achieve city status and could remain a strong rural town

Gladstone could still represent a stronger and more ‘secure’ investment as it grows to become a major norther city hub in northern Queensland and also has a major hospital, a university and tafe, private schools, enhanced retail and entertainment, the coast etc

 

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