An intersesting article from Minesite was interesting...
June 07, 2007
Fortescue Mineral Forges Ahead At Port Hedland
By Our Man In Oz
Port Hedland, on the north-west coast of Australia, is the last place on earth that anyone would go for a holiday. Too hot, too dusty and too noisy. It is, however, the first place to visit if you want to see the mining boom up close. And, it’s the best place to see why the share price of Fortescue Metals Group has risen from A$6 to A$34 over the past 12 months – and has increasingly excited Australian stockbrokers tipping Fortescue as the next Australian company to crash through the magic A$100 a share barrier, following in the 37 year-old footsteps of one-time nickel “great” Poseidon.
Fortescue’s port site at Anderson Point in Port Hedland under construction
It is in the port, more so than along several hundred kilometres of railway snaking into the even hotter interior, or at the iron ore mines being developed by Fprtescue, that the company’s future is taking shape. The port is also the place where Fortescue goes eye-to-eye with its nemesis, and the company which has staunchly resisted its development, BHP Billiton.
Minews, armed with a cut lunch and several water bottles, last week made the long trek north to Port Hedland, primarily to see the exploration projects of the budding iron ore junior, Atlas Iron. But, it was also an opportunity to see at first hand why some people have re-rated Fortescue from a possible start-up to a near certainty to deliver on its promise of becoming the “third force” in Australian iron ore – and a rival to the big two, BHP Billiton and Rio Tinto.
It is while visiting the harbour that the true shape of Fortescue’s A$3.7 billion project starts to become apparent. Pile driving, wharf construction, stockpile preparation, conveyor belt foundations, and ore dumping structures are rising out of the red dirt, or from the harbour floor itself. More than A$1 billion has already been spent on site works , with A$2.7 million to go. In other words, the project which has attracted more than its fair share of detractors, is more than one-third complete, and perhaps much more when long-lead time items being fabricated elsewhere are included in the count.
Unstoppable is a word used with increasing frequency when discussing Fortescue’s project, and Minews has no argument with that. A key stage in the process, completion of sales agreements to give the company a full order book for its initial target of 45 million tonnes of ore a year, was completed last month. Simple observation reveals that most of the ingredients for the project are in place, or soon will be. Steel railway line from China is being assembled in a lay- down area close to the stockpile yards. Conveyor belt and cable has arrived in giant spools. Dredging the wharf area to a depth of 20 metres, sufficient to handle ore carries up to 270,000 tonnes, has been completed. Much of the concrete for the all-important rail car dumping system has been poured, and work is underway on the concrete footings for the conveyor system to the wharf where a ship loader will be barged in from China and lifted into place.
Seeing what Fortescue has achieved dispels much of the criticism about the project and accusations that the company is biting off more than it can chew. There are still some doubts that ambitious deadlines, such as making the first shipment in about 11 months time, but there are far fewer doubts than six months ago. Nothing that the company is doing is technically complex. It is a simply a big mechanical project with the objective of shifting up to 45 million tonnes of iron ore a year across the wharf – as a first target. If that works, a second stage could lift output to 90 million tonnes a year, a level which would truly rival the big two.
Hurdles to clear in the construction process include proof that a new mining technique being adopted by the company can work as promised. Rather than conventional truck and shovel, the company will use a continuous mining process sometimes seen in coal mines. While a risk, continuous mining is not a potential show stopper. The railway itself is a long line of communication already hit twice by cyclone and flooding damage. For risks associated with long communication lines read the history of Napoleon’s march on Moscow. In the port area, the dinkum money end of the business, there are risks associated with the rail car dumping process - there is only one at this stage- and the single ship loader.
But, rather than focussing on the risks, it is becoming far more interesting to focus on the positives of what’s been achieved. That starts by simply visiting Port Hedland to see the what is really a three-cornered race. Fortescue is speeding ahead with construction of its wharf, stockpiles and loading structures on the south side of the port. BHP Billiton is almost as busy upgrading its extensive facilities on the north side, and at older facilities on Fortescue’s side. The third player in the game is the government of Western Australia which is busy expanding its general purpose facilities to handle a growing number of “other” exporters, such as copper from the Telfer and Nifty mines, and manganese from Woodie Woodie.
Taken as a complete picture the three ore loading projects dramatically illustrate the resources boom. More than A$2 billion is being sunk into Port Hedland itself, and equal amounts are being spent by Rio Tinto at its ports further south at Dampier and Cape Lambert. Inland, the iron ore mines are being expanded in what is a rolling process of investment that is struggling to keep up with Chinese demand. For residual doubters about the longevity of the boom a day in Port Hedland will do wonders – though an overnight stay is not recommended: the first ore train rumbles through town at 5am – early birds, worms etc!!
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