sorry here is articleAtlas considers building Pilbara railway...

sorry here is article


Atlas considers building Pilbara railway open to all comers
BY: SARAH-JANE TASKER From: The Australian April 28, 2012 12:00AM
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THE vast expanse of red dirt covering the Pilbara region of Western Australia is dominated by the world's largest miners but one emerging player is set to jump the biggest hurdle for new entrants and deliver an infrastructure promise the majors have ignored.

Atlas Iron, from its outset, has had a unique story. It started its mining life by hauling its sought-after ore to port via a trucking model but to become a serious competitor in the field, accessing a railway has always been its goal.

BHP Billiton, Rio Tinto and Fortescue Metals Group are all technically meant to provide third-party access to the infrastructure they built themselves but apart from Fortescue, juniors have been unable to strike a favourable deal to get on their rail.

Atlas Iron has been negotiating for years for options to implement its ambitious expansion plans, which see it move beyond the trucking model when it hits 15 million tonnes a year.

But it wasn't until this week that a solid option was presented to the market, when the Perth-based miner announced it had partnered with QR National to examine building a multi-user railway to transport ore from the east and southeast Pilbara to Port Hedland.


The word game-changer has been used several times this week in relation to the potential of the new development but that sentiment cannot be underestimated because if it does go ahead, it will be the first time a multi-user railway will be built in the fiercely competitive region, providing an infrastructure solution for otherwise stranded deposits.

Atlas managing director Ken Brinsden said the deal with QR National was one option but the miner was in a "unique position" because it had a couple of very good infrastructure solutions to consider.

"We have options in front of us to deliver infrastructure solutions in a way that the junior and mid-tier iron ore scene has never had in the past," he said.

"The reason that has happened is because we have been very strategic about our acquisitions, and in particular, the focus we have had on those acquisitions and the relationship to infrastructure. We control 46 million tonnes per annum of inner harbour port capacity in Port Hedland and that is a key strategic driver to facilitate Atlas' growth."

Macquarie analyst Ian Myles said the feasibility study enabled Atlas to price the dedicated line more accurately, so that it can benchmark the alternatives, such as dealing with Fortescue or Gina Rinehart's Hancock Prospecting.

"Logic would suggest a common line is the best outcome, but gains from dominating one's own line compared to being a smaller operator on an FMG/Hancock line provide intangible benefits," he said.

If Atlas does succeed in supporting the development of a new railway that others can access, it will actually be the true champion of the junior sector, a title Fortescue has often put itself forward for. Fortescue has fought fierce battles with BHP and Rio about access to their infrastructure and has always been of the view third-party access should be available on the privately owned Pilbara infrastructure.

Industry insiders are quick to point the finger at Fortescue and cry it isn't an advocate for emerging miners and drives a hard bargain to allow access to its infrastructure but the miner's chief will tell you it's not a charity game.

Chief executive Nev Power said the miner's door was "completely open" but any deal done obviously needed to be done on commercial terms because transporting tonnes of third-party ore down its rail line displaces tonnes the miner would be shipping for itself.

He was also keen to point out Fortescue had shipped Atlas Iron's first tonnes and he said the company was in talks with about three other junior parties in relation to infrastructure access.

"We do have capacity on our infrastructure to carry other people's ore and we welcome any of those parties that want to have us carry that ore. We are absolutely open for business in terms of that and are happy to talk to people on commercial terms to do that."

Mr Power isn't so certain the QR National and Atlas Iron alliance will work because of the available tonnes to support the huge capital expenditure needed to develop the railway.

The 600km multi-user railway, which could cost up to $3.5 billion, could capture as much as 75 million tonnes a year of iron ore production planned by small and mid-tier groups in the central Pilbara and east Pilbara regions.

"I think it will struggle with the projects that are around at the moment and I think that it is a great waste of capital to have four rail systems running in the same corridor," Mr Power said.

"It would seem that there would be BHP, ours, (Hancock Prospecting's) Roy Hill and QR all running virtually the same route. I struggle to see that that makes sense.

"If they can get enough viable projects to support it, it can work, but I question whether there are enough viable projects at the moment to support a new rail system."

There has been talk about Rinehart's Roy Hill project being identified as a potential winner from the development of the multi-user railway but her plans appear still to be firmly to build her own 340km railway from the region to the port.

But analysts have widely agreed that the most logical development of a fourth railway in the Pilbara would need the involvement of Hancock's Roy Hill project.

"We note that Hancock is currently seeking to develop its own railway solution to Roy Hill but we believe there would be benefits from partnering up with QR National and Atlas Iron in developing a single track and minimising duplication," Deutsche Bank analyst Cameron McDonald said.

Macquarie analyst Martin Stulpner said now that the potential for a fourth railway was on the table it was up to the current infrastructure operators to make their move.

"Atlas Iron has been in discussions with various parties who have rail or are planning to build rail in the east Pilbara," he said.

"While the memorandum of understanding with QR National advances one discussion, it also puts the onus back on other potential rail providers, should they wish to partner with Atlas and/or see off a potential competing rail network."