Red Hill considers legal options

West Perth-based Red Hill Iron says it will review its legal options over its participation rights to share in port and rail infrastructure of the West Pilbara iron ore project, spearheaded by Aquila Resources.

Red Hill currently has up to a 40 per cent interest in the Red Hill Iron Ore joint venture (RHIOJV), where the majority of the JV's resources comprise stage 1 of the West Pilbara iron ore project (WPIOP).

Last week Aquila announced that the manager of the WPIOP had recommended Anketell Point, directly west of Cape Lambert, as the preferred port site for the shipping of project iron ore.

The recommendation has yet to be approved by the WPIOP participants being Aquila and AMCI Inc.

The recommendation paves the way for a mine, rail and port development proposal to be lodged with the Environmental Protection Authority for necessary approvals.

Today, Red Hill said while it recognised that it does not have any influence on decisions made by the participants in the WPIOP, it believed it has a "contractual" right to share in any subsequent rail and port development.

"This assertion has to date been rejected by the WPIOP participants," Red Hill said in a statement.

Red Hill acknowledged that it was not certain that the WPIOP participants will accept the Anketell Point recommendation.

"However, should such a decision be taken, then Red Hill Iron will review its position in relation to seeking a court order aimed at ensuring its right to participate as a part owner of those facilities," Red Hill said.

"In considering such a step, the Directors of Red Hill Iron will take into consideration not only the strong legal advice received to date but also the dramatically changed economics of the iron ore export business."

In addition, Red Hill said another port and rail option for the RHIJV was to use the Rio Tinto's Robe River rail line and Port Lambert facilities, which recently was declared open by the federal government for third parties to use.

The announcement is pasted below:

Red Hill Iron Ltd (RHI) owns a 40% interest in the Red Hill Iron Ore Joint Venture (RHIOJV), reducing in certain circumstances to 20%. Currently the greater majority of the CID resources which comprise Stage 1 of the West Pilbara Iron Ore Project (WPIOP) are owned by the RHIOJV participants and consequently, the choice, availability and cost of port facilities for export of product is of critical importance to your Company.

In its recent announcement Aquila Resources Limited (Aquila) stated that the Manager of the WPIOP had recommended Anketell Point, directly west of Cape Lambert, as the preferred port site for the shipping of project iron ore ahead of Cape Preston and Onslow. This recommendation awaits the approval of the WPIOP participants -being Aquila and AMCI Inc. (AMCI).

Red Hill Iron Limited (RHI) recognises that it is not a WPIOP participant and has very little influence on decisions made by that joint venture. However, as detailed in earlier releases, your Company has, through its legal advisers, informed the WPIOP participants that it believes it has a contractual right to share in the studies pertaining to rail and port selection and consequently to a 20% ownership interest in any subsequent rail and port development. This assertion has to date been rejected by the WPIOP participants.

An alternative to establishing new port and rail facilities may be the use of the Robe River Iron Associates railway and Port Lambert facilities. The railhead to those facilities lies adjacent to the Red Hill project area. The sharing of these facilities may prove a superior option and would be in line with the recent decision requiring owners of such assets to allow third party use on commercial terms.

It is not at all certain that the WPIOP participants will accept the recommendation of the WPIOP Manager and proceed with the Anketell Point port study. However, should such a decision be taken, then Red Hill Iron will review its position in relation to seeking a court order aimed at ensuring its right to participate as a part owner of those facilities. In considering such a step, the Directors of Red Hill Iron will take into consideration not only the strong legal advice received to date but also the dramatically changed economics of the iron ore export business.