Ann: Brockman in Negotiations with FMG for Rail a, page-32

re: Ann: Brockman in Negotiations with FMG fo... Article from the West Australian below.


Brockman Resources has offered to fund a $500 million railway as part of a deal to gain access to Fortescue Metals Group's Pilbara infrastructure and allow development of its own Marillana iron ore project.

In return for access to Fortescue's Port Hedland rail and port system, Brockman has argued its bigger peer could use the new railway to reach some of Fortescue's otherwise stranded iron ore assets.

After nearly two years of discussions, Brockman yesterday revealed the two parties were in advanced talks over an "end-to-end haulage, port access and marketing" deal that could see it become the second junior behind BC Iron to strike a rail deal with Fortescue.

But Brockman chairman Barry Cusack was quick to downplay suggestions it would give Fortescue equity in its Marillana project to mirror the arrangement BC struck with Fortescue to ensure development of its Nullagine deposit.

Asked if Brockman would consider giving equity to Fortescue at either the company or project level, Mr Cusack said: "I don't think that's their intention and I don't think that's necessary."

Instead, he said, Brockman could build a spur line to connect it to Fortescue's rail. In return Fortescue would use the spur line to access some deposits it does not currently have access to.

"If we build a spur line to Fortescue it would open up potentially some of their deposits that are further east," Mr Cusack said. "It looks like a win-win deal for Brockman and Fortescue. It's a big deal. It's a long-term deal."

It is understood that although Brockman would fund construction of the line - which Mr Cusack suggested could cost "about half a billion" - it would be built and operated by Fortescue.

Fortescue would not comment.

Brockman shares rose 2? to $4.92.

Brockman needs a way to take its ore from Marillana to Port Hedland to make the project viable. If it does not strike a deal with Fortescue, it would need to do a deal with BHP Billiton or build its own railway, which would likely cost billions.

However, the suggestion of a Fortescue port deal surprised some in the industry, given Brockman has a space allocation at the yet-to-be-built South West Creek development at Port Hedland.

Mr Cusack denied Brockman planned to relinquish its share of the alliance's port allocation.

"We're still working with people (on South West Creek) and there'll be a lot of water to flow under the bridge," he said.

Yesterday's announcement coincided with the release of Brockman's target statement, which confirmed its opposition to a $1 billion scrip takeover from China's Wah Nam International Holdings.

The approach by Wah Nam, which is also bidding for Pilbara iron ore junior FerrAus, has highlighted the need for Brockman to prove it has a path to take its ore to port. Wah Nam has suggested it could build a Chinese-funded standalone railway to connect Brockman and FerrAus to Port Hedland.

Brockman wants to complete Marillana's bankable feasibility study by the second quarter of 2011 before making a final investment decision. First ore is slated for 2013.