Article from the West (abreviated)Plans to combine Rio Tinto and...

Article from the West (abreviated)

Plans to combine Rio Tinto and BHP Billiton’s Pilbara iron ore operations could shut the region’s emerging miners out of the market as they struggle to gain access to crucial rail and port infrastructure.

News of the proposed joint venture yesterday sparked calls for the State Government to step up plans for a third-party rail access regime or risk leaving the sector’s junior players out in the cold.

Fortescue Metals Group executive director Graeme Rowley said thirdparty infrastructure access was now “critical” to ensure the next wave of Pilbara mines were developed.

“This proposed JV represents an opportunity for the Government to renegotiate better access agreements through the new State Agreements,” he said.

“It is now more important than ever that State and Federal governments do what they can to assist smaller miners with the development of their operations.”

Justin Walawski, head of the North West Iron Ore Alliance, which represents Atlas Iron, BC Iron, Brockman Resources and FerrAus, said the deal also heightened the need for diversification in the industry, given expectations of job and royalty losses for the State.

He said alliance members could generate about $200 million a year in royalties.

As things stand, if the BHP-Rio deal goes ahead, juniors in need of rail or port access will have to negotiate with Fortescue or a combined BHPRio.

While Fortescue has shown some willingness to strike deals with juniors — it yesterday finalised terms with BC Iron for an infrastructure deal that will hand it up to 50 per cent of the junior’s Nullagine project — BHP and Rio have long argued they do not have any spare capacity.

Analysts said that argument was unlikely to change if the proposed alliance went ahead.

“From a competitive point of view, it means that this new 50-50 company becomes the new industry gorilla,” one industry source said.

“So the other companies are going to find it even more difficult to get on to the infrastructure because that infrastructure will be used even more intensely.”

The gloomy predictions, however, did not stop shares in the iron ore juniors from racing higher yesterday, largely on expectations that China Inc will step up its investments in WA miners to diversify future supply.

Fortescue, in particular, is tipped to emerge as China’s partner of choice.

A combined Rio-BHP operation is expected to control more than two fifths of the world’s seaborne trade in iron ore.

Fortescue jumped 38¢ to $3.18, BC Iron was catapulted 24.5¢ higher to 87¢ and Brockman Resources climbed 13¢ to $1.18.