fmg hammered 10 bucks..now 6 bucks, page-17

re: railway ruling right : goodyear says Access to BHP line was just an icing on the cake as Miny Mindy is relatively small and is in JV with CSM. So the main game remains unchanged. Market may have read too much into Costello's non decision.
Here is what The Australian thinks of Costello, fairly reflective of the view expressed in AFR which is a little more scathing or even SMH.


Costello cruels Fortescue bid to use BHP rail
Robin Bromby
May 24, 2006
BHP Billiton and Rio Tinto have kept their stranglehold on iron ore production in the Pilbara after Treasurer Peter Costello effectively cut the ground beneath the National Competition Council.
Mr Costello has overruled the NCC, which had recommended BHP's Mt Newman railway be declared open to third parties for 20 years. The NCC did this in the face of a spirited lobbying campaign by BHP and Rio.

The shares of the loser - Andrew Forrest's Fortescue Metals Group - slid $1.23 to $6.07, which, on top of reverses due to the commodities correction, has seen FMG lose more than a quarter of its value since May 10. FMG had sought access to part of the Mt Newman line so that it and partner Consolidated Minerals could develop the small Mindy Mindy iron ore deposit. Mindy Mindy is too small to justify building a separate railway to Port Hedland.

The decision has no bearing on FMG's main Chichester Ranges project, where the company is planning to build its own railway to Port Hedland.

This is the second substantial win for the big end of town in the Pilbara in recent weeks. Last month, the West Australian Government ruled in Rio's favour, and against junior Cazaly Resources, in the dispute over the Shovelanna deposit. Cazaly had pegged the tenement after Rio missed the deadline to renew its lease and the decision for Rio was seen by miners as flying in the face of the state's mining laws.

In this latest decision over the railway, what has particularly angered FMG is that the federal Government killed the NCC recommendation by allowing it to lapse - and thus avoiding having to give any reasons for the decision.

This gives FMG scant legal grounds for an appeal to the Australian Competition Tribunal. Mr Costello had 60 days to announce a decision on the NCC recommendation to declare the railway open - but the Trade Practices Act provides that if no decision is made within those 60 days, the status quo applies.

FMG government relations spokesman Julian Tapp said Mr Costello had effectively undermined the basis of competition policy. "Big companies have vested interests - that is what competition policy is for," he said. "Mindy Mindy is the archetypal example of why the Trade Practices Act is meant to work."

But the big unexplained element was why the Treasurer had intervened. Until early May, under normal procedure, the NCC decision was the responsibility of the parliamentary secretary to the Treasurer, Melbourne politician Chris Pearce, and it was to him that FMG made its final submissions. But then the Treasurer intervened and took the decision away from Mr Pearce.

Mr Costello said last week: "Under the act the decision is given to the Treasurer. The Treasurer can delegate it but because it is such an important decision I thought it was important that the Treasurer do it himself personally."

BHP was pleased. Chief executive Chip Goodyear said declaring open access on the line would have disrupted the smooth running of his company's iron ore operations. "You just can't open it to anyone who wants to use it," he said. BHP would now discuss with the West Australian Government offering haulage on its lines but with BHP-run trains.

However, Mr Tapp said FMG had little faith in this ever coming about.

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