EMERGING Pilbara miners have begun lobbying the state government for a better deal on infrastructure access in the wake of BHP Billiton and Rio Tinto’s decision to scrap their planned $120 billion iron ore joint venture.
The decision has refocused attention on the state government’s promise to amend the pair’s Pilbara state agreements to provide greater operational flexibility.
The changes will ease existing restrictions on which ports and railways can be used to transport ore from specific areas, and allow greater blending of ore from different deposits.
They could potentially even enable the two big miners to share some export infrastructure to capture parts of the merger’s expected $10 billion in savings.
The government has indicated it expects to finalise its proposed legislative changes by the end of the year.
But Premier Colin Barnett has already conceded he will not use the process to beef up the existing third party ore haulage obligations of the current state agreements, which have proved to be completely ineffectual.
Mr Barnett had previously stated that improved infrastructure access for emerging miners was a key objective of his negotiations with BHP and Rio.
Consequently, the North West Iron Ore Alliance of emerging Pilbara miners has demanded the government force through a better deal on infrastructure access.
Alliance chairman Ian Campbell said that should include legislative amendments to enshrine the rail haulage access rights of the emerging home-grown iron ore companies, which merely wanted a “a fair go, not a free ride.
“A defined tonnage of reserved capacity needs to be guaranteed so the majors meet the obligations laid down in the State Agreement Acts,” he said.
Allowing BHP and Rio to share their infrastructure to the continuing exclusion of emerging producers would simply embed a de-facto monopoly in the Pilbara”, Mr Campbell added.
Rio can expect immediate benefits from the amended agreements by gaining full flexibility to optimise its existing network of three railways and two ports as it continues a massive expansion to boost its capacity by a third to 330 million tonnes per annum by 2016.
In particular, Rio’s Cape Lambert port is already being doubled to 180mtpa and has the potential to be doubled again.
Port access is therefore shaping as a critical issue.
BHP will need to spend $10 billion developing an outer harbour at Port Hedland to meet its longer-term targets if it cannot negotiate access to Rio’s ports.
All of Port Hedland’s existing inner harbour’s maximum potential capacity of 495mtpa has already been allocated, and is insufficient to meet the expansion targets of current users.
BHP has been allocated 240mtpa, enough to meet its 2013 expansion target but not enough to achieve its ultimate target of 300mtpa.
Fortescue Metals Group has an allocation of 120mtpa, but wants to export 155mtpa from the port by mid-decade. A further 17mtpa is allocated to users of the new Utah Point berth such as Atlas Iron, with the remaining 105mtpa split between the NW Alliance’s planned South West Creek jetty, and Hancock Prospecting’s planned Stanley Point berth.
Interestingly, FMG last week said it expected to take some of the capacity allocated to other users to meet its expansion target.
Port Hedland Port Authority chief Andre Bush confirmed that all parties were keen to secure more inner harbour capacity, but said each party was obliged develop its facilities in a timely fashion if it wished to retain its existing allocations.
However, all parties were currently progressing in line with their commitments to the port, he said.
“As such, no changes to the capacity allocations are envisaged by us in the foreseeable future,” Mr Bush said.
