Crossed lines on rail access

HANCOCK Prospecting and South African joint venture partner Kumba Resources Limited has denied claims it received an offer for access to BHP Billiton’s Pilbara railway line as required under State Government legislation.

The rebuttal followed comments by BHP Billiton spokesman John Crowley, reported in WA Business News on May 23, that the mining giant had made a formal offer to Hope Downs Management Services, which is undertaking a feasibility study into the Hope Downs Project.

Under the 1987 Rail Transport Agreement, BHP Billion is required by law to negotiate in a fair and reasonable way with any third party that wishes to make use of the BHP Billiton-owned railway line.

Kumba’s Australian operations managing director Jacques Du Plessis denied that any offer had been put on the table to use BHP Billiton’s 400-kilometre Newman to Port Hedland line.

Hope Downs hopes to utilise the existing line to exploit the 800 million tonnes of Marra Mamba iron ore.

“Contrary to recent reported comments in the media, I can confirm that the project manager, Hope Downs Management Services (HDMS), has never received a formal offer from BHP Billiton regarding access to the Mt Newman Rail Line,” Mr Du Plessis said.

“HDMS representatives certainly held discussions with BHP Billiton, however, these never progressed to a reasonable or practicable commercial outcome and they were always made to understand that the subject of those discussions did not constitute an offer from BHP Billiton.”

Mr Du Plessis said the failure to agree on the application of the 1987 Rail Transport Agreement with BHP Billiton had led Hope Downs to seek legal action to test this issue.

However, Mr Crowley re-iterated BHP Billiton’s position, informing WA Business News that an offer had indeed been made to HDMS.

“We have made an offer to them without prejudice but I’m not going to get into a public slanging match with them. It is now before the courts,” Mr Crowley said.

The two parties are due to appear in the Supreme Court on June 29.

Despite his assertion that an offer was put on the table, Mr Crowley said BHP Billiton questioned whether HDMS was actually a third party according to the rules stipulated in the 1987 Agreement.

HDMS project manager Russell Tipper said the agreement still lacked clarity on how the negotiation process was to occur.

“The State agreement still lacks a clear mechanism,” Mr Tipper said. “It hasn’t opened the doors to third party access.

“There is about a $300 million saving if we find that the agreement does apply to us. That’s upfront and doesn’t include ongoing costs.

“It (third party rail access) may not be critical to the project, but it could be. There’s a lot of ifs and buts.”

Mr Tipper also expressed his disappointment that the State Government was noticeably absent in the debate and not taking a leadership role in determining and administering the agreement.

“They are the co-authors of the agreement so we think they should be there to say what they make of the agreement,” Mr Tipper said.

Mr Du Plessis said he remained committed to resolving the interpretation of the agreement through the legal test case.

He said it was the only way Hope Downs could accelerate the process of opening up the rail infrastructure to multiple users on a shared basis.

The joint venture is proposing to initially mine five million tonnes a year, ramping up to 25 million tonnes a year in five years.

Kumba Resources Limited was listed on the JSE Securities Exchange in 2000 after splitting from steel company Iscor after operating as the mining division of Iscor for more than 70 years.

Kumba now has a market capitalisation of $2.6 billion. In addition to the Hope Down sProject, the group has a 48 per cent shareholding in WA mineral sales producer Ticor Limited, a 34 per cent interest in nickel producer Mincor Resources NL and a 15 per cent stake in junior mineral sands producer Mineral Deposits Limited.

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