FMG puts $576m price tag on rail access

Fortescue Metals has told Brockman Mining it could charge the company up to $576 million a year to access part of its Pilbara rail line as third party access negotiations continue.

The junior iron ore explorer is seeking access to Fortescue Metal Group’s rail infrastructure in the Pilbara and wants to haul up to 20 million tonnes of iron ore per year from Marillana to a proposed rail spur near Port Hedland.

But Brockman has requested that the Western Australian Economic Regulation Authority step in to set an access price after private negotiations between the companies failed to result in an agreement.

A Fortescue spokeswoman said any access arrangement with The Pilbara Infrastructure (TPI) "will require that the third-party project is financially viable and capable of funding the additional infrastructure required.”

However documents released yesterday by TPI show the FMG subsidiary has set an exorbitant price on access to its rail line.

A minimum fee of $73.4 million a year was set by the company, with an even higher ceiling price of $576.6 a year.

WestBusiness reported the price was based on Brockman’s request to move 20mtpa on the line, which TPI claims adds up to a floor price of $3.67 a tonne, and a ceiling price of $28.78/t.

Analysts say the price is well above $17.50 to $20/t figure FMG is charging BC Iron for haulage, which also includes port handling prices at Port Hedland.

Brockman Australia's chief executive Russell Tipper has previously stated there will be spare capacity on TPI and the next phase of Pilbara development is likely to be characterised by partnerships.

"We are encouraged by numerous statements from FMG advocating its support and provision of third party access on its TPI rail system," Tipper said.

"If this is done on a commercial and genuine basis it will greatly support junior miners and create significant infrastructure synergies in the Pilbara."

He said the WA government rail access process would help junior miners gain access to existing infrastructure.

Fortescue recently announced is intention to sell part of the rail and port infrastructure by mid-year.

Atlas Iron is understood to be the frontrunner to secure a stake in the heavy rail and port facilities, valued at more than $3 billion.

To keep up to date with Australian Mining, subscribe to our free email newsletters delivered straight to your inbox. Click here.