CAZ 5.00% 1.9¢ cazaly resources limited

afr article

  1. 13,180 Posts.
    lightbulb Created with Sketch. 2676
    W/E AFR P11

    "The Pilbara duopoly is being challenged, writes Jo Clarke.
    Western Australia's iron ore-rich Pilbara region has long been the bastion of BHP Billiton and Rio Tinto, which have exploited their stranglehold on the railways servicing the remote deposits to stymie potential competitors.

    The often maligned "Pilbara duopoly" has stepped up efforts to maintain its competitive position, highlighted by deals with the minnows along the boundaries of their expansive iron ore operations across the north-west of the state.

    Strong demand and high prices for iron ore have spawned juniors keen to cash in on the China-led boom. This has fuelled a deal-making frenzy by BHP Billiton and Rio Tinto to lock up the future production of the smaller players before the other does.

    For the "duopoly", it also avoids any dent to the status quo from Asian players staking a greater presence in the region.

    The heavyweights are hoping that entering into rail transport agreements with smaller iron ore companies may quell the pressure from competition regulators, and more sizeable would-be competitors, to make their railways available to everyone.

    Andrew Forrest's Fortescue Metals Group has been the most aggressive of the newcomers, pegging vast tracks of land and petitioning the West Australian government and National Competition Council to force BHP to allow it access to its Mount Newman railway.

    Forrest asserts he will be in production by early 2008, despite hitting many hurdles, including claims by the Australian Securities and Investments Commission that he misled shareholders by claiming he had binding deals with Chinese companies to develop and finance the infrastructure to support the Christmas Creek project.

    Fortescue has a loose joint venture with Consolidated Minerals to develop a mine at ConsMin's Mindy Mindy deposit. The venture is 50:50 but CSM retains operational control and is negotiating with BHP and Rio Tinto to sell the ore at mine gate, which could bypass FMG's efforts to secure independent access to BHP's railway through the NCC.

    Cazaly Resources and partner Echelon Resources have secured a deal to sell to BHP ore from the Shovelanna project, but must first secure approval from the state government after Cazaly took the ground from under Rio in August.

    Rio is arguing it is not in the public interest for Cazaly to retain the ground, for which Rio failed to renew its exploration licence.

    Days after BHP announced its off take agreement with Cazaly in November, Rio Tinto informed the market it had signed a letter of intent with former gold and nickel explorer AusQuest to develop the Nameless Prospect, which is five kilometres from Rio's Tom Price mine and contains ore similar to that shipped from the Yandi mines of BHP and Rio.

    Rio will fund a drilling program at Nameless through a $1 million share placement in AusQuest. It will then elect whether to fund an order of magnitude study within two years to potentially earn 60 per cent of the project.

    Iron Ore Holdings, which also holds ground in the Yandi region, is negotiating with BHP to sell its ore at mine gate or to have BHP haul the ore to the coast for it.

    Few, if any, of these new Pilbara entrepreneurs, many of whom were exploring for nickel or gold before iron ore assumed centre stage last year with a 71.5 per cent rise in the benchmark price, will survive as independents. Some will fall because their projects do not stack up at forecast long-term prices. The rest are likely to be snapped up by one of the majors or by Asian investors.

    Asian steelmakers and traders are desperate to see alternative iron ore producers to reduce the price negotiating power of BHP, Rio and Brazil's CVRD and some are willing to put their money where the mouth is.

    Chinese trader SinoSteel during the week agreed a memorandum of understanding with Cape Lambert Iron Ore. It also has a significant stake in Midwest Corp and has been negotiating with others, including Fortescue.

    SinoSteel is not alone in its ambitions. Chinese traders CITIC, Sinom and Shandong Yuansheng are all competing to form alliances with Australian miners and to get on their share registries.

    Rio Tinto, which has fewer available resources in the Pilbara than BHP, has been the most acquisitive in the region. It acquired 50 per cent and operational control of Gina Rinehart's Hope Downs project last year and had bought North to gain control of Robe River.

    The new generation may be challenging the Pilbara duopoly, but unless it gets considerable help from Asian backers, BHP and Rio Tinto will be able to buy out any projects that make the grade and maintain the status quo."
 
watchlist Created with Sketch. Add CAZ (ASX) to my watchlist
(20min delay)
Last
1.9¢
Change
-0.001(5.00%)
Mkt cap ! $8.764M
Open High Low Value Volume
1.9¢ 1.9¢ 1.9¢ $2.552K 134.3K

Buyers (Bids)

No. Vol. Price($)
2 139578 1.9¢
 

Sellers (Offers)

Price($) Vol. No.
2.0¢ 425001 1
View Market Depth
Last trade - 14.58pm 12/07/2024 (20 minute delay) ?
CAZ (ASX) Chart
arrow-down-2 Created with Sketch. arrow-down-2 Created with Sketch.