Pilbara rail decision to cost $30bn: Rio

Fortescue Metals Group Ltd is a step closer to gaining access to railways in the Pilbara owned by BHP Billiton Ltd and Rio Tinto Ltd after a government body said they should be opened to third parties.


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The ground over which BHP and RIO transport their product is Australia and belongs to all Australians. BHP and RIO have been given permission to build infrastructure on this land that hauls their goods to export sites, benifiting shareholders and ultimately all Australians through taxes and royalties. The huge cost of infrastructure means that developing any minor mineral deposit so far from the ports is prohibitive, and effectively means that only those companies that have infrastructure can ever economically develop them. So short of finding a massive resource and duplicating all of the infrastructure, these smaller deposits will go unexploited to the detriment of all Australians; because under the current system, If the likes of BHP and RIO decide that these smaller mining operations are just too small for them, that's it, no development. On the other hand, if the infrastructure is openned up to all third parties, smaller resources will be developed and in fact it creates an incentive for smaller explorers to do what they are best at. The argument rebuffing open infrastructure is that the infrastucture is a part of the overall operation, ie it could be likened to a tricycle where the train line is like one of the wheels, make us (BHP & RIO) take one of the wheels off and lend it to someone else (every now and then)and we cant ride our bike. And that hurts all Austalians as our business dwarfs any other operation. And the benifit to Australia from a third party operation does not warrant us taking a wheel of our bike. The argument goes that for Australians there is negative or no benifit to interupting a profitable operation for the sake of some little tin pot mine. Sounds good... what is wrong with the argument? The premise is that both RIO and BHP are running at 100% capacity, presently they are not and the excess capacity has been there for some time. But with closed infrastructure no one else can use it at present. They argue that they plan to exand into that excess capacity. Assuming that the port infrastrucure is sorted out (the fed and states must be involved here) then on a 300km train line multiple sidings can be built, etc so that the primary operation is not too disrupted. Note I said too distrupted, there will be some distruption. That is the price we all pay daily for co-operating with others. Now lets come back to the opening argument. Who provided the ground/access on scarce port land and across Australia to build the infrastructure required in the first place. Ausralia and all Australians. How quickly they forget that it is a give and take relationship with winners all round. It would be fair that BHP and RIO charge a govt. regulated access fee to third parties as operator. With this price settled (perhaps with a fuel and labor charge surcharge structure built in), junior miners can get on and explore, develop and produce. This will effectively open up provinces that are not economically viable under the current closed infrasrtucture system. I disclose that I hold BHP, FMG and BRM.

highton 3216
Sirs .I wonder if Fortescue are prepared for some part of their operations to be "NATIONALIZED" at the whim of some unelected group in future.The exports from WA have been allowed to grow unhindered by union interference and bureaucratic bungling so evident on the East Coast. Smaller mining companies can join forces to build their own rail systems.We hear the constant cry that infrastructure is lacking.BHP and RIO have built their own because the Nation failed to do so and now we are going to choke them up.

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