14/06/2018 - 15:42

Atlas loses port development rights

14/06/2018 - 15:42

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Atlas Iron has disclosed it no longer holds exclusive port development rights at Port Hedland that were central to the takeover battle that has involved three mining heavyweights buying shares in the company.

Atlas received a notice from Rita Saffioti.

Atlas Iron has disclosed it no longer holds exclusive port development rights at Port Hedland that were central to the takeover battle that has seen three mining heavyweights buy shares in the company.

Atlas owns 63 per cent of North West Infrastructure, which was awarded rights a decade ago to develop a 50 million tonnes per year shipping facility at South West Creek, which is part of the inner harbour at Port Hedland.

Those development rights were believed the be one attraction for fellow iron ore miner Mineral Resources, which struck a $280 million takeover deal early this year with the struggling Atlas.

However, its friendly merger with Atlas has been blocked after both Gina Rinehart’s Hancock Prospecting and Fortescue Metals Group acquired 19.9 per cent stakes in Atlas.

All of these companies currently export from Port Hedland, which is one of the country’s busiest and most congested ports.

FMG and Hancock have not explained why they purchased a blocking stake in Atlas, but it’s safe to assume they would be concerned about the extra congestion flowing from one more shipper with capacity of 50 million tonnes per year.

 

Source: UBS

They would also be concerned about another exporter adding more volumes to the market and depressing iron ore prices.

The premise for all of this competing takeover activity may have evaporated after Atlas received a notice from the office of transport, planning and lands minister Rita Saffioti.

The company said this notice “implies” that NWI does not have a priority right to develop two berths at Stanley Point, which fronts onto South West Creek.

The two berths are reserved for “junior miners” and the Pilbara Ports Authority will assess any development application on its merits.

“Atlas considers that this position is contrary to the previous stated policy of the Western Australian government and is considering its position with respect to this notice,” the company said today.

The minister provided further details in parliament this afternoon, saying NWI (which is part-owned by Brockman Mining) lost its exclusive development rights because it had failed to pursue the berth project.

“The exclusive arrangements will no longer apply because after many years of asking to prove up the proposal, that didn’t happen,” Ms Safffioti said.

Ms Saffioti insisted this was a continuation of the policy applied by the Barnett government.

“The previous government tried to get a commitment in relation to the developments there, tried to get some movement, that didn’t happen,” she said.

“Nothing moved and as a result that exclusivity was taken away.

“Year after year that feedback was given,” she added.

“The port authority continued to have that stance.”

Ms Saffioti said this policy was put in writing after Atlas Iron asked last week for confirmation.

While today’s news will affect the takeover battle for Atlas, it may not affect Mineral Resources growth plans.

The company disclosed last week it wants to develop a Cape-size berth at South West Creek and has commenced formal negotiations with the Pilbara Ports Authority on this.

In other words, it may be hoping to develop its own shipping berths on the same patch of land previously earmarked for NWI.

This would be additional to its allocation at the government-owned Utah Point berth.

Both Atlas Iron and MinRes currently use Utah Point, which is reserved for junior miners and has a total capacity of 24mtpa.

The minister declined today to answer questions on the definition of a junior miner, arguing this may advantage particular companies

“I’m not going to add to further speculation and further activity out there in the stockmarket,” she said in response to questions.

The term junior miner has always been very loosely defined – it logically would include the likes of Atlas Iron (with a market cap of $408 million) but would exclude Fortescue (with a market cap of $14 billion) and the privately-owned Hancock Prosecting.

Mineral Resources has been considered a junior for access to Utah Point, but with a market cap of $3.1 billion, its much larger than most companies described as junior miners.

The two berths previously reserved for NWI are among eight berths included in long-term plans for South West Creek.

The Pilbara Ports Authority obtained environmental approval in 2011 for these berths.

FMG has developed two of these berths, which are linked to three extra FMG berths at the tip of Anderson Point.

Hancock Prospecting subsidiary Roy Holdings later built two berths at the northern end of South West Creek.

FMG’s five berths support annual shipments of 170 million tonnes, while Roy Hill ships about 55mtpa.

The final two berths are reserved for fuel and general cargo.

 

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