August 30, 2008

FMG applies for Pilbara rail access

It is reported that Fortescue Metals Group's battle for third party access to railway lines in Western Australia has again intensified as FMG has sought rights to a network near a massive new deposit. The application will be reviewed by the National Competition Council.

Fortescue has applied to the National Competition Council to have rail networks in the Pilbara region, operated by Rio Tinto and BHP Billiton, declared open to third parties. It’s long running 3½ year battle to gain access to BHP Billiton's Mount Newman line which Fortescue wants to allow the development of its Mindy Mindy iron ore deposit is now before the High Court.

In the latest twist, Fortescue is calling on the council to declare Rio's Hamersley Iron rail network and BHP Billiton's Goldsworthy rail network open to third parties. The Hamersley Iron network passes close to Fortescue's newly discovered Solomon deposit, which has an iron ore resource of about 1 billion tonnes.

Mr Andrew Forrest CEO of Fortescue told journalists that he hoped to set a precedent and pave the way for other mining companies in the Pilbara. He added that there was a lack of competition in infrastructure in the Pilbara and a proposed merger between BHP Billiton and Rio Tinto would only make it worse. Mr Forrest said that "This is a separate and new declaration process on Rio Tinto's railway lines and the remainder of BHP's railway lines."

Mr Forrest said that "The opportunity is available to Australia now for the ACCC to seek orders that the Pilbara should be open for all Australians and not simply multinationals. If and when BHP Billiton makes a formal offer for Rio and proceeds to seek merger clearance from the ACCC, we will ensure that the potential anti-competitive effects of this merger are clearly understood by the ACCC and are rigorously and fully assessed over time."

Mr Forrest said open access in the Pilbara was in the national interest. He added that "These are very under utilized railway lines. There are a number of stranded iron ore deposits and while the newly identified Solomon deposits have its own infrastructure solutions, like other deposits, these may not be optimal." He also said use of the Hamersley rail network and Goldsworthy rail line could be more efficient. If successful, Fortescue's Pilbara Infrastructure subsidiary will be allowed to offer a haulage service to third-party customers, including Fortescue.