CASHMERE Iron might have stirred up a hornet’s nest with a deal to fund the development of engineering plans for the expansion of Esperance harbour, but there is little sign that the budding miner’s management is flustered.
Perhaps that is because the group has a foundation agreement with Esperance Ports, which it says guarantees an allocation of 5 million tonnes per annum if the first stage of a proposed harbour expansion takes place and a further 5mtpa if more capacity is added.
The deal has clearly upset others in the sector and appears to have cost the former CEO of Esperance Ports Michael Frydrych his job.
Cashmere is a private iron ore hopeful which plans to use a start-up direct shipping ore project to fund the development of a much larger magnetite project on its Yilgarn deposit.
Cashmere Iron chief David Hendrie, who is a big believer in the future of magnetite, plays down talk that his company has any control over the situation once the study is completed, beyond an agreed allocation to export if the expansion takes place.
He said it would be up to government to decide how the expansion would be done, having signalled that a recognised infrastructure company was likely to be involved in the development of the port.
“It (the agreement) was about us realising we had to have an exit point for our ore and make a commitment to getting those studies done,” Mr Hendrie said.
That statement ought not come as a shock to anyone.
As the value of the minerals in the ground has risen rapidly, so has the pressure on the state’s port infrastructure to provide the exit point Mr Hendrie speaks of.
All around the state there are winners and losers in this battle, and laying claim to a berth or a volume allocation is a significant asset as a host of new bulk commodity players face up to the enormous task of getting their product to market.
Those battles have raged at almost every multi-user port in the state. Western Australia’s biggest iron ore port, Port Hedland, has played host to significant behind-the-scenes activity as numerous mining heavyweights seek to secure berth space. In just a few years the port has not only had to treble volumes and plan for a further doubling, but it has moved from servicing one big customer in BHP Billiton to having numerous exporters, including companies run by two of the nation’s richest people – Andrew Forrest and Gina Rinehart.
It is possible that lobbying in the berth battle may also have cost Port Hedland Port Authority chairman Ian Williams the chance to extend his term by a year, although much of the talk about that has focused on the port’s poor profitability in 2009-10.
Whatever the case, his successors will be wary of stepping on toes.
The battle over control of planned Mid West port Oakajee may also have major ramifications for the region’s miners. While Sinosteel appeared to be the first victim when it put its $2 billion Weld Range iron ore project on ice, blaming ongoing delays in developing deepwater port and rail lines, the reality was that move added to the pressure on Murchison Metals, a junior miner that owns half of the port project. After a recent feasibility study, Murchison acknowledged that it was likely to need help funding the port project.
Even down at Fremantle, iron players have battled it out for access.
In May, Fremantle Ports announced it would allocate 4.4mt of iron ore and 750,000t of coal capacity to Mineral Resources and Griffin Coal, respectively, a decision that left out another hopeful, Cazaly Resources, which said it was looking at other options.
Perhaps the most interesting battle bubbling beneath the surface is over a port that doesn’t even exist.
Fortescue Metals Group is vying with another iron ore player, Aquila Resources, to take control of the next major port in the region at Anketell.
Aquila was seen to be the front runner to develop a multi-user port but FMG is agitating for the role and claims a bigger port should be planned for – a move that would potentially delay the harbour’s development and prove costly for anyone who needs it to export.
Meanwhile, WA Transport Minister Troy Buswell is playing his cards close to his chest when it comes to revealing details on how he plans to act on a recently received review into WA’s ports.
Mr Buswell told WA Business News recently the state’s ports needed to act more cohesively and strategically when it came to ensuring the state’s minerals had that exit point.
His distaste for competition between ports over customers suggests the minister would like to see a better return for the state’s ports in return for a more orderly process for expanding and developing them in line with minerals development. The expectation was that Mr Buswell would consider bringing in one big ports authority, but some observers have expressed doubt about that model.
An alternative may be amalgamating ports in certain regions to act under one management in line with a strategic plan dictated by the transport authorities.
