Rio Tinto to buy ore and keep third parties off tracks

bevans · Posted: Fri Jul 25, 2008 5:14 pm

RIO Tinto will purchase ore from a junior explorer as the mining giant seeks to prevent third parties gaining access to its railway in Western Australia.

The world's second-largest iron ore producer has agreed to purchase the steelmaking product from Iron Ore Holdings Ltd's (IOH) Phils Creek mine, 90 km from Newman in the Pilbara region of WA.

"It demonstrates our preferred alternative to the growing demands from government and industry for access to our rail infrastructure," Rio Tinto iron ore chief executive Sam Walsh said in a statement.

Junior iron ore companies led by Fortescue Metals Group Ltd are seeking access to Rio Tinto and BHP Billiton Ltd's railways in the Pilbara to export the steel-making commodity amid rising prices for the commodity.

IOH shares gained 4.5 cents, or 7.89 per cent to 61.5 cents by 1534 AEST, while Rio Tinto dropped $4.11 to $115.99.

The National Competition Council (NCC) last month called for public comment on its draft recommendation that three separate railways owned by the majors be opened for access by third parties to improve competition in the haulage market for iron ore.

The NCC will make its final recommendations to Federal Treasurer Wayne Swan following the public submission period.

Under the agreement with Rio Tinto, IOH will deliver the ore to the Yandicoogina stockyard where Rio Tinto would take ownership and transport it for sale to customers.

IOH's Phils Creek project is still in the feasibility stage but it is envisaged the operation would produce about 1.5 million tonnes of iron ore per year.

"This commercial agreement represents an excellent opportunity for Rio Tinto to gain access to extra tonnage and, importantly, in a way that does not jeopardise the efficiency of our fully integrated production system," Mr Walsh said.

Melbourne Herald-Sun

RP2 - Project Director

"Victoria, the home of world class project blowouts and overruns" Mr. Bachelor, hang your head in Shame!

Controller · Posted: Sat Jul 26, 2008 4:15 pm

A smart move by both Rio and IOH......a win-win situation.

Why waste good money trying to fight the big multi-nationals....you never win.

All gave some, Some gave all

awsgc24 · Posted: Sat Jul 26, 2008 5:11 pm

And at what price will the third party ore be bought at?

Controller · Posted: Sun Jul 27, 2008 7:09 pm

who gives a hoot, as long as both parties have come to an amicable arrangement Cool

All gave some, Some gave all

awsgc24 · Posted: Sun Jul 27, 2008 7:14 pm

PILBARAMAN · Posted: Sun Jul 27, 2008 10:00 pm

They have signed a contract to sell their Ore,they will make money simply because Rio and themselves are splitting the difference between them hauling it to Rios Rail and then Rio hauling to the port,they would both be making decent money at current prices,and when you look at infrastructure costs it was mostly likely the best scenario and amicable.

574M · Posted: Mon Oct 27, 2008 5:15 pm

Landmark decision in WA rail lines stand-off

Posted 1 hour 6 minutes ago
Updated 57 minutes ago

BHP and Rio have always had monopoly control over their rail lines.

The Federal Government has ordered mining companies Rio Tinto and BHP-Billiton to open up their rail lines in WA's north-west to third parties.

Both BHP and Rio built their rail networks decades ago and have always had monopoly control over them.

But rival miner Fortescue Metals Group called for the Hammersley, Robe River and Goldsworthy rail lines to be opened up to others to use.

FMG has long argued that the State Agreements which bind Rio Tinto and BHP had always intended the lines be opened to third parties.

Federal Treasurer Wayne Swan today declared the rail networks should be opened up from November 19 for 20 years.

Mr Swan has rejected the miners' concerns that third party access would cost the economy billions.

Rio Tinto's head of iron ore, Sam Walsh, says allowing third parties access to its rail will reduce the amount of iron ore it will be able to export.

He says future expansions will be more complex and therefore delayed.

Rio Tinto says it is considering its options and is likely to take the matter to the Australian Competition Tribunal for a review of the decision.

http://www.abc.net.au/news/stories/2008/10/27/2402594.htm?section=justin

awsgc24 · Posted: Mon Oct 27, 2008 6:50 pm

Draffa · Posted: Wed Oct 29, 2008 6:02 am

Question: Why can a private company be forced to open up their own infrastructure to other companies? They've built and maintained the rail network, why should they be forced to allow access to newcomers? Is there some issue with the land the rails run on?

rhino · Posted: Wed Oct 29, 2008 9:17 am

Draffa, I think you'll find that the land is government land, leased to pastoralists (for cattle stations) and the mining companies have exploration licences and rights to dig up whatever is under the ground for a prescribed period. Part of the deal allowing them to lay a railway across government land is that the railway be used in the best interests of the people of the state. More mining companies digging more ore out of the ground and exporting it brings more money to WA. If they can export their ore using existing infrastructure, there's more money for WA, therefore the WA govt wants the infrastructure to be available to whoever needs it to secure more money for the state. RIO are not going to let third parties use this line for free - they will have to pay for access. The real reason Rio and BHP don't want other companies using their lines is that it would make it harder for other companies to get their ore to port, so they might give up, and then the big boys will snap up their leases.

Cheers, Rhino

rjaygee · Posted: Wed Oct 29, 2008 9:18 am

These miners receive many concessions from the public purse including land to lay their tracks so its not surprising third party access may be forced on them. The nice photo used to illustrate the access story made a very nice screen background on my work computer.

Cheers

Rod Gayford

Draffa · Posted: Wed Oct 29, 2008 9:40 am

Ah, so they lease the land the ROW is on, rather than owning it.

Controller · Posted: Wed Oct 29, 2008 2:17 pm

The court ruling allowing FMG and other junior miners access to BHPBIO or Rio Tinto iron ore railway lines does not necessarily mean that these two multi national resource companies are obiliged to allow these junior miners to run their own trains on their railways.

The courts may say that both BHPBIO and Rio have to allow access, but that access will be the major players hauling the juniors product from a siding on the majors railway line by the majors motive power to a siding near the juniors port where it will be detached for the junior miner to haul to their port facility and you can bet your bottom dollar that the junior miner will be be paying top freight dollar to get their product moved and it will only be moved in a designated railing slot......miss that connection and you have to wait for the other slot available in the schedule between the majors schedule.

With the present global financial woes, I would doubt not too many junior miners will be left on the playing field. Even FMG with there low share price could be ripe for the picking of one of the major miners and that will be them out of the picture and the situation of 3rd party access will disappear and it will be back to the two major players only left in the game.

All gave some, Some gave all