rail spur, page-17

Hi andy,

you were asking about possibility of third party rail access to bhp/rio lines. I've spoken to a few people about it and this is what they said:

1. BHP shareholders paid for the rail line - why should other people use it? I didn't agree with this statement, but that is the view amongst some insiders.

2. BHP will fight FMG to the end against 3rd party access. That will take at least 5 years.

3. IF 3rd party access is granted - then neither BHP or RIO will spend any money on upgrading the infrastructure. Why should they spend their money for the benefit of others? --This sounds like the argument Telstra used for not enabling ADSL2+ on its exchanges.


In my view:

Maybe its better that BHP/RIO get to keep their rail lines. Low phosphorous iron ore is in decline (there are many billions of tonnes of high phosphorous ore). UMCs ore would potentially have value to any nearby producer including BHP and RIO.

IF UMC ever build their rail spur and shun offers to buy at the gate - then it offers huge upside for the stock:

1. They could blend Railway ore with Fork North Brockman ore - and increase tonnage massively.

2. UMC becomes an infrastructure play, not just another IO stock. I think much of the value that FMG has is its infrastructure rather than its ore.


Where does UMC get the $300 million from ???

I can't see how a placement or share purchase plan is going to do it. There could be a possibility of a deal with a Chinese investor, or possibly a cashed up Aussie company. Pure speculation on my part - but that's what happened with FMG, CFE, MIS, MMX and just about every other serious IO play.



Joel