Yilgarn Infrastructure is set to reveal today it has strengthened its case for a $1.5 billion railway network in the Mid-West by signing a deal with Golden West Resources that will effectively deal the Chinese-backed group back into the iron ore region.
WestBusiness understands Yilgarn has secured Golden West as a foundation customer in a significant boost to its chances of sewing up access to the Mid-West’s iron ore players, despite last month losing out to Oakajee Port & Rail (OPR) on the WA Government’s nomination to build a $1.6 billion multi-user port north of Geraldton.
The move is likely to put the pressure back on OPR to step up efforts to strike similar deals or accept a situation whereby Yilgarn is left to develop a railway while OPR develops the port. Yilgarn also hopes to build its own berth at Oakajee.
Sources close to the deal told West-Business that Yilgarn would finance and build a railway to connect Golden West’s flagship Wiluna West project to the proposed port at Oakajee. The deal is also likely to include access to Yilgarn’s proposed private berth.
Yilgarn and Golden West were unavailable for comment last night.
The future of Yilgarn and OPR’s ambitions may now hang on whether Midwest Corp and Gindalbie will stick to their own customer agreements signed with Yilgarn, which were conditional on Yilgarn securing the Government’s Oakajee nomination.
Yilgarn has previously said it is confident they will, while OPR has signalled it will try to strike its own deal with the two companies, which look likely to emerge as the biggest producers in the Mid-West in the medium term.
However, OPR, which is guaranteed access to Murchison Metals’ ore given it co-owns the company along with Japan’s Mitsubishi, has yet to do so. Gindalbie’s relationship with its shareholder and joint venture partner AnSteel may also give Yilgarn the edge, because it too is Chinesebacked.
The Government is yet to select railway corridors but has indicated the two parties will need to decide if more than one track can be financially justified. Under the terms of the Government’s Oakajee deal, OPR will be repaid the development bill for the port through other users’ charges as well as handling fees, meaning the rate of the payback will be determined by the number of users.
Construction of the port is expected to begin by late next year after a development deal is finalised and OPR has secured financing. The port is expected to be operational by 2012.
The Golden West deal will bolster Yilgarn’s plans for a sharemarket float next year. The company insisted the float was on track after missing out on the Oakajee nomination last month but its value was expected to be cut sharply to reflect Yilgarn’s failure to win the port tender. While the agreement represents a significant step forward for Yilgarn, it will also aid Golden West just four days out from a key meeting at which shareholders will vote on a handful of resolutions from major shareholder Portman.
Golden West has defended last week’s offtake deal with China’s Hunan Valin Steel Tube & Wire group, criticised by Portman as premature, as necessary leverage to enter discussions with Yilgarn and OPR over transport.
KATE EMERY Edited by SEAN SMITH
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