BC Iron, Fortescue sign up for Pilbara joint venture

JUNIOR explorer BC Iron has finalised a company-making deal after it agreed to give up half of its Pilbara iron ore project in exchange for access to Fortescue Metals Group's port and rail facilities.

The companies last week signed an agreement to establish a joint venture to develop BC Iron's Nullagine iron ore project, located in the east Pilbara.

Under the terms of the agreement, the companies will each contribute equity of up to $10 million to the project, with the remaining development costs to be funded through project finance.

Capital development costs are currently pegged at between $35 million and $50 million.

BC Iron will manage the joint venture, including operations, road haulage, marketing and ore sales.

Fortescue will manage all rail and port operations, taking product from the project stockpile at its Chichester operation to ships in Port Hedland.

BC Iron managing director Mike Young said the agreement helped overcome critical infrastructure barriers to iron ore production.

"This is a great outcome for both BC Iron and Fortescue, a fantastic result for our shareholders and an important step for the continued development of the junior iron ore sector in the Pilbara," Mr Young said.

He said the deal would put it on track to become the Pilbara's next iron ore producer.

BC Iron expects to start production at Nullagine in early 2010, subject to completion of the feasibility study and securing all relevant statutory approvals.

The feasibility study on Nullagine is due for completion this month, and focuses on an initial production rate of 1.5 million tonnes a year.

The operation will then be ramped up to 3mt each year and then to 5mt once the rail line is extended to Christmas Creek and port capacity is increased.

An agreement between both companies was initially struck two years ago.