Here's an interesting article from today's miningnews.net
Given that DSO tonnages within trucking distance of Port Hedland are limited, how will Atlas fill their port capacity?
Build their own railway ($$$)? Use someone else's ($$$)? Develop nearby Balla Balla and/or Ridley magnetite deposits ($$$)?
As DF says, "Financially for us we think the best thing we can do is use unused capacity on existing railway lines.” Yes, obviously, but this depends entirely on the deal made with the owner of the train set. FMG gave BC Iron access to their rail but they had to give away 50% of the project (Nullagine).
I can't see a cheap way out of this. Any thoughts anyone?
DAVID Flanagan has a problem. He has just closed the deal on Atlas Iron’s takeover of Ferraus but faces the same battle that many a Pilbara digger has encountered – lack of access to a rail line.
Atlas managing director David Flanagan at Wodgina.
Flanagan told the Hedland Economic & Resources Forum that his company had been successful with its Pardoo operation trucking its ore to Port Hedland Port.
However, despite the company cutting its own road most of the way to Port Hedland it will only ever be able to shift 15 million tonnes per annum this way.
With Ferraus on board and the ground it has gained from other acquisitions, that sort of throughput is not going to cut it. It also falls short of the allocation Atlas has been given at Port Hedland Port.
Rail is probably the only option.
“We are talking to the people you would think we should be talking to, although I’m not sure I can tell you I’m talking to who you think we should be talking to,” Flanagan said.
“Financially for us we think the best thing we can do is use unused capacity on existing railway lines.”
Herein lies the rub. It is the age-old Pilbara question of who has train sets and who is allowed to play with them.
BHP Billiton and Rio Tinto have built their businesses around having a fully integrated supply chain. They own their own rail lines and have continued to argue that they are a vital part of the production process. To allow other parties onto their rail lines would hurt their business, they say.
Fortescue Metals Group has indicated that it is prepared to open up its railway line to other parties, as it did for BC Iron. It only cost BC Iron a 50% equity stake.
Atlas Iron was one of the parties involved in the determination stoush over BHP Billiton’s Goldsworthy line. While it won access to that line it has since shelved plans to make use of it – at least for now.
Still, while he may be feeling a little railroaded on the transport front, Flanagan certainly takes solace from the health of Atlas’ business.
“We’re selling our ore for $150 a tonne,” he said.
Taking out the usual costs and taxes Flanagan said that meant Atlas netted about $70-80/t.
In about seven years the company has gone from being a $9 million company with two employees to one with 450 on the payroll and a market capitalisation within cooee of Qantas’.
Flanagan puts a lot of that down to the support the company received in Port Hedland, particularly in its early, struggling days.
He also paid tribute to the sheer wealth that is being generated there.
“Port Hedland, in the next six months, will generate more profit than Kalgoorlie has done in the last century,” Flanagan said.
