australia's loss to the big australian

No doubt a move to prevent the emerging pilbara junior producers.

BHP move stops CRM becoming Pilbara player
GARIMPEIRO / BARRY FITZGERALD
October 17, 2009

BHP Billiton has blocked plans by China Railway Materials Commercial Corp (CRM) to become the fourth ''force'' in the Pilbara iron ore industry by consolidating ownership of projects owned by junior companies.

But to block the plans, BHP has had to effectively buy back the Railway iron ore deposit in an agreed $204 million takeover bid for United Minerals Corporation, the junior that acquired (and advanced) the project after BHP relinquished it in 2004.

The move by BHP is set to frustrate CRM's plans to become the fourth force in the Pilbara behind Rio Tinto, BHP and Andrew Forrest's Fortescue Metals, as UMC has recommended the BHP takeover bid of $1.30 a share in preference to a competing deal from CRM.

Chinese interests are getting used to that in the Pilbara, with BHP and Rio now working towards completing a merger of their Pilbara iron ore joint venture, a deal that replaced an earlier deal that China's state-owned Chinalco had with Rio on its Pilbara and other assets.

Industry talk has for some time been that CRM was looking to grab key stakes in several junior operators in the Pilbara that would have been in production by now but for the lack of rail and port access. CRM would deliver infrastructure remedies.

CRM has a September deal with UMC under which it would have emerged with an 11.38 per cent UMC stake from a planned $27.2 million placement at $1.35 a share (with attached options), plus the intention to strike an offtake agreement on Railway's development.

But the agreed nature of the BHP deal, and the highly conditional nature of the CRM deal - including clearance from the Federal Government - means BHP is on its way to getting the Railway deposit back.

BHP is expected to initially warehouse the deposit, with the acquisition of UMC more about keeping competing interests out of its backyard. The Railway deposit is adjacent to BHP's Mining Area C project in the Pilbara.

The rest of the junior iron ore sector was boosted by the BHP move, with hopes raised that those with deposits near existing railways in the Pilbara now had the option of either striking an access agreement with the railway owners (BHP, Rio and Fortescue), or receiving a takeover bid.

Access to railways in the Pilbara is a hot issue, with BHP's move on UMC coming as BHP and Rio battle Fortescue in the Australian Competition Tribunal over access to four rail lines in the region.

Fortescue, which has made third-party rail access something of a cause celebre of late, wants to reverse a decision of former treasurer Peter Costello who, by not doing anything, effectively rejected the recommendations of the National Competition Council and so denied Fortescue access to BHP's Newman-to-Port Hedland rail line.

Mr Costello's successor in the Rudd Government, Treasurer Wayne Swan, followed the NCC's recommendations and opened access to third parties on BHP's Goldsworthy-to-Port Hedland rail line and Rio's Hamersley and Robe lines that connect with the port facilities at Dampier.