Ross Norgard, left, and Warren Beckwith yesterday .?.?. prepared to back a breakaway rail line in the Pilbara. Photo: Megan Lewis Emerging iron ore miner Brockman Resources is in talks with Chinese and Japanese steel mills to help fund its $1.9 billion Marillana project in the Pilbara and is prepared to back a breakaway QR National rail line to get its ore to port.
Brockman’s joint deputy chairmen, Ross Norgard and Warren Beckwith, said Hong Kong-listed Wah Nam International had secured more than 70 per cent of Brockman as part of its takeover bid, valuing the company at an implied price of $3.03 a share.
They were confident this would rise to more than 80 per cent by the March 19 bid deadline, allowing the takeover to become unconditional and the focus of the company to switch to its Marillana mine.
“A successful takeover will simplify the structure and will be more attractive to financing parties when it comes to a joint venture,” Mr Beckwith told The Australian Financial Review yesterday.
Brockman’s project has long been viewed as pivotal to a new rail line in the Pilbara that would allow companies such as Gina Rinehart’s Hancock Prospecting, Atlas Iron and Brockman to break the dominance in the area of big miners such as BHP Billiton and Rio Tinto.
Mr Beckwith said while Brockman was in “constructive” negotiations with Hancock, it was feasible Brockman and Atlas with their planned expansions could go it alone on a rail line built by QR National.
“It is quite possible that Hancock might want to retain independence over its rail infrastructure and it is quite feasible there might be a QR solution quite independent of Hancock,” he said. “So you might get two new rail lines [in the Pilbara].
“It is impossible for us to comment on what Hancock might or might not do, other than to say the market feeling is it will be more difficult [for miners seeking rail access] to deal with Hancock than it is QR.”
Analysts estimate a new rail line would require about 80 million tonnes a year of off-take agreements to make the project economical. In the past this has been assumed to mean that Hancock, which has until now had its heart set on building its own rail line, would need to be involved, given its $9.5 billion Roy Hill mine will produce 55 million tonnes of iron ore annually.
But Mr Norgard said Brockman’s exploration opportunities could see it produce up to 40 million tonnes of ore, up from 15 to 25 million a year targeted at Marillana, potentially underpinning a line with Atlas.
Mr Beckwith said Brockman was in talks with potential minority equity partners including Chinese and Japanese steel mills.
“Early discussion with parties from both China and Japan confirm that [favourable financing terms] would be the case,” he said.
He said Brockman’s mine faced cost pressures similar to all mining projects in Western Australia but the footprint and processing design of the mine could change to partly offset this.
Mr Norgard dismissed criticism regulators had not investigated allegations of related-party buying during the takeover, saying ASIC had done a “thorough job”.
Brockman’s shares were unchanged at $2.23.
BRM Price at posting:
$2.24 Sentiment: Hold Disclosure: Not Held
