A FLURRY of activity in the Western Australian iron ore sector has highlighted growing concerns about infrastructure bottlenecks in the Pilbara.
A FLURRY of activity in the Western Australian iron ore sector has highlighted growing concerns about infrastructure bottlenecks in the Pilbara.
Locking in higher royalty rates and a $350 million bonus payment from iron ore heavyweights BHP Billiton and Rio Tinto, the state government last week finally introduced legislation to give the pair greater operational flexibility in the Pilbara.
The legislation will remove decades-old restrictions in 11 state agreements covering the big miners’ Pilbara operations that will enable them to fully optimise exports from their respective mining, rail and port operations.
Considered a fallback to their now-abandoned $116 billion Pilbara iron ore joint venture, the legislation will allow each miner to blend ore from any of their deposits and export it via whichever rail and port facilities it chooses.
The changes will also allow the pair to share their existing infrastructure, though any such move is now highly unlikely given the failure of their planned Pilbara joint venture.
The big winner from the legislation will be Rio, which will be able to immediately optimise its network of 14 mines, three railways and two ports.
In contrast, BHP will remain reliant on Port Hedland’s already congested inner harbour, which has a total estimated potential capacity of 500 million tonnes per annum.
BHP currently has a capacity allocation of 240mtpa at the port, just enough to meet the needs of its $6.6 billion RGP5 expansion now under way, and follow-up RGP6 expansion.
But it leaves BHP with few options to meet its mid-decade export target of 330mtpa other than reviving a stalled $US10 billion outer harbour development.
Putting further pressure on Port Hedland, Fortescue Metals Group last week approved a $US8.4 billion expansion to treble its output to 155mtpa, despite having a port capacity allocation of only 120mtpa at Port Hedland.
All of the inner harbour’s current and potential capacity has already been allocated to existing and prospective users, including Hancock Prospecting and North West Iron Ore Alliance members Atlas Iron, Brockman Resources and FerrAus.
The capacity allocations of Brockman and FerrAus are thought to be key factors in this month’s surprise hostile takeover offers for both companies by China-backed Hong Kong group, Wah Nam International, a major shareholder in both.
The juniors’ bitter fight for access to existing Pilbara rail infrastructure has returned to centre stage, with BHP last week agreeing to start talks with Atlas over a possible rail haulage deal for its under-utilised Goldsworthy track.
At the same time, BHP launched court action to stymie FerrAus’ efforts to gain access to its Newman line.
