ubs appointment - why ?, page-33

Angel

Ever since UMC talked about the possibility of running a 110 km spur line to FMG's multi user facility, I supported the juniors combining their iron ore assets. Makes a lot of sense to me.

Quite apart from tax concessions, there are three other major benefits for BHP/Rio in combining their iron ore inventories.

1. More efficient use of their rail/infrastructure network.

2. Hugh benefits in blending ores.

3. Achieve higher iron ore benchmark prices.

The benefits of combining iron ore assets for UMC, BRM, IOH, ROY and TLM would also flow onto FMG which leases 68% of the tenements (by distance) of the 110 km spur line. Individually the juniors and FMG are weak, but as one they are a force and pose a far stronger threat to BHP/Rio.

IOM the Chinese could fund the spur line via their FMG connections.