Action needed on infrastructure pledges

INVESTMENT in new infrastructure, and ensuring equitable and fair access to existing infrastructure are key issues that must be addressed if government is to encourage new mining investment, according to those at the WA Business News junior miners forum.

Both federal and state governments have made significant public commitments to investing in new industrial infrastructure - notably port, rail, power and road facilities - in the fight to counter the effects of the global slowdown.

However, consensus at the forum was that, irrespective of who takes the plunge, those worthy promises must be quickly turned to action or junior miners would turn their attention elsewhere.

Furthermore, delay would also mean Australia was not in a position to meet stronger demand for key commodities, such as iron ore, in five years if it failed to get the infrastructure settings right to encourage the successful entry of newcomers.

"You've got to do it now, you've got to make sure that adequate funds are put aside for investment now, whether its public or private participation in those investments," Pioneer Resources chairman Craig McGown said.

"But there's got to be a mindset of government that they recognise the key is for these projects to be developed in Australia. Otherwise explorers will go to places like Africa where ... the development process is a lot easier.

"Everyone sitting around this table is saying there's got to be a catalyst, there's got to be a government approach which says 'we are pro development'."

Mal Randall, chairman of aspiring Pilbara iron ore miner Iron Ore Holdings, said one of the key factors in government taking such an approach was ensuring that existing infrastructure, such as port and rail facilities in the Pilbara, could be accessed by new producers on fair terms in a timely manner.

For more than a decade, Pilbara giants BHP and Rio Tinto have fought tooth and nail to prevent other companies from accessing their iron ore railways, despite equitable third-party access being an explicit condition of the state agreements that entitled them to mine Western Australia's rich iron ore reserves.

While Fortescue Metals Group is slowly winning its five-year legal push to gain access to BHP's railways, it has also built its own facilities an has negotiated port and rail service agreements with two Pilbara newcomers, Atlas Iron and BC Iron.

However, progress for other companies such as IOH, which have key deposits jammed between both BHP and Rio's lines, has to date been glacial.

Mr Randall said one of the key issues for Pilbara juniors was that all the focus was on rail access and did not address port access. So while it may be hypothetically possible to negotiate rail haulage with a major such as BHP, there was no mechanism to secure its export from the coast. Even the state government's $200 million pledge to build the Utah Point multi-user iron ore wharf at Port Hedland it is not accessible from existing rail facilities, limiting its use to small-scale miners trucking ore to port.

It is, therefore, imperative for all parties - big and small to cooperate - if the industry is to avoid playing into the hands of its overseas competitors.

"Our competitors in the iron ore business are not the Australians in the Pilbara, it is the Brazilians and the Indians ... so it's time we all sort of worked together to benefit WA and Australia," Mr Randall said.

Polaris Metals managing director Ken Hellsten said junior miners had no problem with paying a fair price for access, both in terms of tariffs and capital investment to deliver the incremental upgrade of facilities to cater for third-party use.

However, he said the determination of BHP and Rio to fight all attempts at gaining fair access to their rail facilities suggested their proposed iron ore merger would only make that even less likely.

Will Burbury, chairman of fellow iron ore junior Warwick Resources, said it was therefore vital that the state government acted decisively in using its leverage to make fair access a condition for allowing the merger to proceed.

"We are hopeful that the rhetoric we are hearing from the premier, that he wants to renegotiate the state agreements ... leads to a workable solution on rail access. It's not going to be easy, but here is a time where he has a bit of political leverage to achieve an outcome; and if we as juniors don't believe that's going to happen, then we are in the wrong business," Mr Burbury said.

Mr Randall said the 'Kambalda model' - where big companies sell their smaller assets to junior companies, but continue to buy the ore - was an ideal model in places such as the Pilbara iron ore fields.

The phrase refers to WMC's sale of its mostly small Kambalda nickel mines to junior miners in the late 1990s in return for offtake contracts with the juniors. The move revived Kambalda, which remains one of WA's most productive nickel fields, but which would otherwise have closed down in the hands of a single big producer.