Sydney, 3 June (Argus) — Australian iron ore miner Fortescue Metals is proposing to charge A$73mn-A$576mn/yr ($70mn-554mn/yr) for a third party to access its rail system linking the Pilbara mining region to Port Hedland in Western Australia.
Developer Brockman Mining is seeking to negotiate rail access terms with Fortescue that will allow it to haul 20mn t/yr of hematite iron ore from the Marillana mine project, which is targeting a 2016 start-up. Fortescue's proposal possibly equates to a price of up to A$29/t.
Brockman is the first company to apply to the Western Australia Economic Regulation Authority to gain access to Fortescue's railway, after five years of commercial negotiations failed to reach an agreement on fees. It is unclear how long the proposal will take to process, although Brockman hopes it will take no longer than 18 months to agree a price.
Fortescue has already agreed commercial terms with its joint-venture partner BC Iron to haul up to 6mn t/yr of ore from their Nullagine joint venture for around A$20/t. BC Iron owns 75pc of Nullagine and Fortescue holds 25pc.
If Brockman can gain access to the Fortescue rail line, it will build a rail spur linking to Marillana and another spur to export facilities at Port Hedland. Brockman has also worked with rail haulage group Aurizon on developing a separate rail line, known as the East Pilbara independent railway, connecting the Pilbara iron ore deposits to Port Hedland. But this is a very capital-intensive option.
Brockman and China's Tianjin Port last week agreed to look into working together to develop infrastructure for the Marillana project.
The attempt by Brockman to gain third-party access to an existing rail system is a repeat of the strategy employed by Fortescue when it was looking to develop its Pilbara iron ore mines early in the last decade. Fortescue originally sought open access to the rail networks owned and operated by Australia's two largest iron ore miners Rio Tinto and BHP Billiton, but then decided to build its own network in the face of formidable opposition. Fortescue's attempts to gain access to Rio Tinto and BHP Billiton's networks are still caught up in the courts, nine years after proceedings started.
Fortescue had promised to allow much easier third-party access to its railway. But it is now seeking a buyer for its rail infrastructure and needs to show the best return possible for potential investors.
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