05/07/2013 - 11:20

FMG says Brockman can't fit on rail network

05/07/2013 - 11:20

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Fortescue Metals Group says its Pilbara rail network is at capacity and any move to allow Brockman Mining access would result in reduced state iron ore royalties and federal taxes, and ultimately lead to lost jobs.

The claims are in a submission to the state’s economic regulator, which is set to decide whether rail infrastructure can be shared in the Pilbara after a proposal was put forward by China-backed Brockman Mining.

Brockman used a state government access code in May to apply for access to the rail network, which is owned by FMG subsidiary The Pilbara Infrastructure.

FMG said today that its railway was designed, constructed and funded to meet its sale and production targets.

“There is, therefore, no logical basis for Brockman to infer, as it has in its access proposal, that Fortescue has designed, constructed and funded a railway system with capacity surplus to Fortescue’s needs,” the submission said.

FMG said its current expansion of the rail network to 155 million tonne per year capacity was due for completion in the second quarter of next year, with production targeted to ramp up to an annualised run rate of 155mtpa by December.

“As Fortescue is utilising all the capacity of TPI’s railway, unless there is further expansion beyond Fortescue’s planned expansions, there is no capacity available to Brockman,” FMG said.

FMG argued that allowing Brockman access to the network would ‘de-rate’ the railway, resulting in a drop in productivity due to inefficient use.

The iron ore miner said that would result in a reduction in iron ore royalties paid to the state government, reduced federal taxes paid by FMG, decreased employment in the Pilbara and a reduction in payments to native title holders from lower production.

The claims are expected to be a blow to Brockman’s ambitions to connect its Marillana and Opthalmia iron ore projects to the world’s largest export port and Port Hedland.

Brockman signed a non-binding deal with rail operator Aurizon earlier this week to consider the development of a new heavy haul railway by Aurizon, to be called to East Pilbara Independent Railway.

The deal also allows for a new railway to be developed by a third party, or the use of an existing railway, such as FMG’s.

Brockman also conducted a study to evaluate a new railway with Pilbara miner Atlas Iron and Aurizon, and despite that agreement expiring earlier this week Brockman said it remained a “concept under consideration”.

BC Iron managing director Morgan Ball poured cold water on any new rail network proposal floated by Brockman and Aurizon alone, saying potential production would struggle to support its construction.

“Personally I think you’ve got to go back to the source and I’m not sure there’s enough tonnes to justify a stand-alone network at the moment and the big swing factor there of course is what Atlas are doing,” Mr Ball said.

‘I’m not privy to what (Atlas managing director ) Ken Brinsden is doing but clearly he’s talking to Fortescue, clearly he’s talking to Aurizon, if Ken ends up with an infrastructure solution around TPI in some way…I can’t see Brockman alone supporting the Aurizon-type deal.”

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