fms discusses rail

http://money.ninemsn.com.au/article.aspx?id=871672
Flinders discusses rail links with Rio
5/10/2009 5:15:01 PM

Iron ore explorer Flinders Mines Ltd is in early stage talks with Rio Tinto Ltd about potential mine gates sales from its Pilbara project in a remote and rugged part of Western Australia.

Access to infrastructure - providing a path to export - is a key challenge for the project, near Rio Tinto's Tom Price iron ore mine in the Hamersley Ranges.

But selling iron ore to Rio Tinto for blending purposes is just one solution being investigated by Flinders, the company's managing director Kevin Wills told reporters during a tour of the operation.

Any deal could be similar to the one Rio Tinto struck in July 2008 with Iron Ore Holdings Ltd (IOH), under which the Kerry Stokes-controlled junior miner will sell product from its remote Phil's Creek mine north west of Newman to the mining giant in 2010.

Mine gate sales provided the best opportunity for early income, Dr Wills said during the weekend tour.

However, Flinders will also look into potential rail access agreements with Rio Tinto, which operates a rail line that runs from its huge Paraburdoo and Tom Price mines to Dampier Port, passing within a few kilometres from Flinders' project.

Flinders chairman Bob Kennedy said the company was also in talks with Fortescue Metals Group Ltd about using a proposed spur line connecting Fortescue's Solomon deposit, which adjoins Flinders' project, to its existing rail line to Port Hedland.

An option is to sell initial production to Rio Tinto through mine gate sales, and then export later output via Fortescue's and Aquila Resources Ltd's planned Ankatell Point port and rail joint venture.

This would involve Flinders contributing $3 million to $4 million to a spur line linking its Pilbara project to the joint venture's network.

"We've definitely got possibilities but no deals on infrastructure yet," Dr Wills, a former executive of the Rio Tinto owned CRA Exploration Pty Ltd, said.

He said Flinders will wait until Rio Tinto and fellow major miner BHP Billiton Ltd complete their planned 50/50 iron ore joint venture in the Pilbara, which is aimed at unlocking value from their neighbouring resource projects.

"Until the BHP/Rio (Pilbara iron ore) joint venture is completed, they don't want to do anything," Dr Wills said.

The mining giants expect to finalise their planned tie-up by mid-calendar 2010, by which time Flinders anticipates having completed its pre-feasibility study.

"We need to finish the study before we can talk turkey with them," Dr Wills said.

Flinders is confident it can strike a deal once it proves up sufficiently high grades and tonnes at its Pilbara project, where it has defined a 511 million tonne resource grading 55.4 per cent iron in the inferred category of Australia's mineral reporting code.

About eight different iron ore mineralisation types have been encountered on the tenements, including some evidence of hypogene hematite, a highly sought-after variety of iron ore that can reach grades of 75 per cent.

Dr Wills said this ore was not part of the pre-feasibility study, but if more was discovered it could "change the nature of the project".

He said Chinese steel mills had already expressed interest in offtake deals, but Flinders would only enter detailed negotiations once the study was complete.

Shares in Flinders ended at 13.5 cents, up 0.5 cents or 3.85 per cent, on Monday.