AS well as the struggle for control of various iron ore companies of the Mid West region of Western Australia, there's a potentially far more significant battle about to play out.
This one directly pits Chinese interests against those of Japan in the new iron ore frontier. It involves the future of the only deepwater port on the Indian Ocean coastline for hundreds of kilometres. And it may become a model, for better or worse, of how to handle Australia's need for massive new infrastructure investment for the efficient development and export of its resources.
It all means that the West Australian Government has an extremely difficult choice to make by the end of this month about its preferred bidder to build a $3 billion port and rail project at Oakajee, just north of Geraldton.
That process has become even more sensitive because of the focus on the level of Chinese investment in Australian resources.
The state Government's choice is between Yilgarn Infrastructure, half-owned by five Chinese companies including trading giant Sinosteel, and Oakajee Port and Rail, half-owned by Japan's trading giant Mitsubishi.
To complicate matters further, each bidder is associated with one of the two main iron ore companies in the region, Midwest and Murchison Metals, which are in the midst of their own protracted takeover fights.
But while the federal Government is focused on the implications of Sinosteel's attempted takeover of Midwest as well its application to be permitted to also take over Murchison Metals, Canberra has so far taken no direct interest in the infrastructure argument.
According to the state Liberal Opposition, that is a big mistake. Colin Barnett, a former Liberal minister for resources and ex-leader of the Opposition, is particularly vocal about what he sees as a dangerous oversight.
"The federal Government is struggling to grasp the difference between the significance of mid-cap mining companies and strategic infrastructure," he says.
"It doesn't really matter much who owns mid-sized mining companies, but ownership of crucial infrastructure is far more important.
"Surely Australia wouldn't contemplate an overseas investor, let alone an overseas government, controlling something as strategic as Oakajee -- the only deepwater port on the Indian Ocean coast for 1500km.
"It doesn't matter what is said or done about independent regulation. The group that builds and owns the port will effectively control it."
Barnett also argues that if China controls the port, the Japanese would be reluctant to use it, and vice versa. That outcome would be curiously perverse financially for the companies, given that the port will be the only feasible option for exporting iron ore from the region from whatever mine.
And the customers are likely to be the same, either way -- Chinese steel mills.
But whichever port proposal wins, the result looks certain to create a new set of tensions with either the Chinese or the Japanese, both of whom are already highly sensitised to any changes in Australia's attitude to ownership of resources.
"The state Government is going to have to pick a loser," says one player.
Oakajee Port and Rail is even happy to make the inflammatory suggestion that its interests are more aligned to those of the state because it is acting for the sellers of the ore and Sinosteel will be acting for the buyers.
Chris Eves, CEO of Oakajee, says its business model is based on driving an open-access regime for the port and the rail, so that as many mines as possible in the Mid West can access any international markets for the sale of their product.
"New mines will sell to whoever will pay the highest price," Eves says. "That may or may not be Chinese mills."
Yet Western Australia's forceful and high-achieving Minister for Planning and Infrastructure, Alannah MacTiernan, is having none of the talk of national rivalry or wider political agendas at stake.
She insists the decision will be all about which group has the best proposal for the project in terms of technical superiority and financial structure.
"We will not be playing favourites on the basis of nationality," she says. "We are totally neutral about whether it's a Chinese company under direct control of the Communist Party or whether it is a totally capitalistic Japanese company. I am confident that we will be able to construct a regime that will be fair. The port will be handed over to the Geraldton Port Authority to run and it will be regulated and obliged to provide third-party access to all users."
Such access is another highly controversial issue in Western Australia, given the long-term argument about miners locking up infrastructure for their own purposes. BHP and Rio Tinto have done so in the Pilbara for decades before now being challenged by Fortescue Metals Group.
Yet the debacle of an inefficient and badly co-ordinated ports and rail infrastructure system in Queensland and NSW has made the West Australian Government even more reluctant to follow that model.
Under the terms of the state Government tender for Oakajee, the winning developer will be able to build and operate its own berth while transferring common-user infrastructure to the control of the state and receiving a payment for others' use.
Even so, MacTiernan concedes that the choice facing the Government is not its preferred option. The limited tonnages available to the Oakajee port at the moment mean it is only economically viable as a common-user facility.
The Government wanted the two groups to put in a joint venture bid for the port and rail on this basis. MacTiernan was finally forced to concede that this would not happen, considering the fierce rivalry between the two companies -- or as she calls it, "a lack of maturity".
Ironically, this combined result may now be more possible, depending on what happens with the various takeover battles.
Sinosteel is currently firming its grip on Midwest in the aftermath of its hostile takeover bid -- the first ever by a Chinese company. It first gained approval for the move on Midwest from the Foreign Investment Review Board last January, and its cash offer seems to have vanquished a simultaneous takeover proposal from Murchison Metals.
But it now turns out that Sinosteel had also applied to the Foreign Investment Review Board for permission to try to acquire 100 per cent of Murchison Metals.
As revealed by The Australian, the federal Government has now formally delayed, until up to mid-September, its decision on whether to permit the Sinosteel application.
Until last month, Sinosteel had been content to quietly keep withdrawing and resubmitting its application for Murchison Metals every 30 days, as permitted by FIRB guidelines. The Government's insistence on a formal extension means there is now a firm timetable for a decision by mid-September.
Clearly that decision will determine what happens to the ownership of the infrastructure.
If Sinosteel's application is accepted, the rivalry with Murchison Metals and Mitsubishi may be overtaken by events.
But the West Australian Government is due to make its own choice of preferred port builder by July 30 -- which will give the winner the right to build the railway as well. This decision has already been delayed by a month to allow time for a detailed technical assessment of the bids by an independent committee.
The politics can't be so neatly tied up.
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