FMG reveals draft rail prices for juniorsKATE EMERY, The West Australian July 14, 2010, 7:09 am
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Fortescue Metals Group has given WA's junior iron ore sector a first look at what they could be charged for access to the miner's Pilbara railway.
In what amounts to a significant step towards a long-awaited third-party access regime, the Andrew Forrest-headed miner has proposed charging third parties between $5.07 a tonne and $5.77/t for access to the 270km railway line linking Fortescue's Cloudbreak mine to port facilities at Port Hedland.
The proposed "floor-and-ceiling" costs were revealed in Fortescue's submission to the Economic Regulation Authority - the body charged with devising a way to value third-party access to its railway.
Determined by complex modelling, the charges equate to about 2? per tonne per kilometre, would fluctuate depending on tonnages and include a capital charge to reflect the cost of establishing and replacing infrastructure over time.
An established access regime could throw a lifeline to Pilbara juniors like FerrAus and Brockman Resources, which would be able to build a spur line to Fortescue's railway instead of facing either the prohibitive cost of building their own or trying to strike a deal with BHP Billiton or Rio Tinto.
Rail access is crucial to WA's iron ore sector because without it those deposits not within trucking distance of the port will remain stranded.
Fortescue's proposed costs, which are not final, are thought to be broadly in line with industry expectations.
FerrAus managing director Mike Amundsen welcomed the news.
"It's an encouraging movement in the right direction that will allow the juniors to get product from their mines to the port," he said.
Junior miners and other stakeholders have until August 20 to make submissions to the ERA, which has been wrestling with the problem of how to value third-party rail access to Fortescue's line for the past two years.
Talks over Fortescue's railway are separate from the debate over BHP and Rio's Pilbara rail networks.
Fortescue's Cloudbreak line, which is owned by its infrastructure subsidiary The Pilbara Infrastructure, was built under the Railway and Port Agreement Act of 2004 and has been included in the WA rail access regime since July 2008.
The latest development for the Pilbara's fledgling junior industry came as iron ore spot prices slipped to their lowest level this year on slowing Chinese demand.
According to Goldman Sachs JBWere, the spot price for 62 per cent iron ore delivered to the Chinese port of Tianjin is now 37 per cent below its April 21 high of $US186.50/t.
It slid another 3 per cent yesterday to $US118.10/t - its lowest point since December 29.
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