fmg - aqa

What is FMG up too?
Want to keep cost down?
They want more port space?
FMG doesn’t mind more ore from small miners?
Interesting!

Fortescue to re-engage with Aquila

http://www.businessspectator.com.au/news/2014/5/7/resources-and-energy/fortescue-re-engage-aquila
Fortescue Metals wants to restart talks on a proposed Western Australia iron ore export port that could allow smaller miners to compete more effectively with giant rivals such as BHP Billiton and Rio Tinto.

But reviving plans for the port at Anketell Point in the Pilbara region carries risks for developers, as iron-ore prices have been eroded by worries over oversupply and as the new port would help increase the flow.

Fortescue Chief Executive Nev Power said building a port at Anketell Point would help cement his company's position as the world's fourth-largest iron-ore producer, supporting its plans to develop iron ore reserves in the western corner of the Pilbara. These have so far been set aside in favour of mines closer to existing infrastructure connected to Port Hedland, the world's busiest iron-ore port.

Mr Power's comments Tuesday came a day after China's Baosteel Group and Aurizon Holdings, Australia's largest freight operator, said they wanted to acquire Aquila Resources, the company spearheading the development at Anketell Point. Baosteel said it was planning a joint bid with Aurizon that values Aquila at $1.4 billion after becoming frustrated at delays in getting the proposed port project into construction.

Infrastructure in the Pilbara, from which two in every five tons of iron ore shipped globally by sea are sent, is tightly held by major miners such as Rio Tinto and BHP Billiton. In addition to Rio Tinto-controlled Cape Lambert, shipments also go through Port Hedland and Dampier.

Fortescue had held talks previously with Aquila about using the port, but its interest cooled when Aquila struggled to raise enough funds to build it.

"We are very interested in Anketell as a development because, in the longer term, we do see an opportunity for us to use that port," Mr Power said in an interview. "We will re-engage and offer our participation to help ensure the port gets developed."

Mr Power said he wants to see it developed in a way that it could be used by "the maximum number of users" possible from western Pilbara, opening up a new export route for smaller miners. Infrastructure bottlenecks have discouraged new players from digging mines and threatened the growth or survival of a handful -- including Aquila, Brockman Mining, and Flinders Mines -- that have already spent millions of dollars planning or constructing new sites.

Aquila forecasts that its proposed Australian West Pilbara Iron Ore Project, which includes port construction at Anketell Point, a 250 kilometre railway and mine producing more than 30 million tons of iron ore a year, would cost $7.4bn.

But disputes between joint-venture partners and a reluctance by lenders to commit billions of dollars in debt financing have largely put things on hold. These difficulties have coincided with iron ore prices tumbling from a record-high above $US190 a metric ton in early 2011 to around $US105 a ton now.

Analysts said a new port could worsen the iron ore price outlook, already pressured by expansion of existing mines in the Pilbara by Rio Tinto and new pits in countries such as Brazil. Much depends on whether demand from China, which buys 60 per cent of the world's iron ore exports, keeps pace with additional supply.

"A fourth Pilbara iron ore port would not be positive for long-run iron ore pricing," said Credit Suisse resources analyst Paul McTaggart.

Mr Power said Fortescue's immediate focus, though, was on putting more tons through Port Hedland. The Perth-based company recently hit its target of producing 155 million tons of iron ore on an annual basis, and thinks it could boost exports by a further 13 per cent by mining more efficiently.

This higher output has allowed Fortescue to repay some of the debt it built during its decade-long transformation from a tiny explorer to a major iron ore exporter. Of net debt of $US7.7bn as of March 31, around $US5.8bn -- or more than 60 per cent -- could be repaid prior to maturity if Fortescue's financial position allowed, the company's management has said.

"For us, it (Anketelle) is very well situated to our western hub tenements," Mr Power said but noted it would take years to build.
"We have already found an estimated 625-million-ton resource in the western hub and we have continued drilling there, albeit in a relatively modest way. It looks very, very interesting in terms of a future hub for us, for extending the life of our existing operations or developing new operations."

Fortescue already has close ties with Baosteel, which is a minority investor in the Iron Bridge project that is targeting production of a lower-grade iron ore from 2015. Baosteel, China's third-largest steel mill by volume, buys much of Fortescue's existing Pilbara output.