Rio Tinto has signed an agreement to purchase ore from a junior explorer in a bid to prevent third parties gaining access to its railways in Western Australia.
The world’s second largest iron ore producer has agreed to purchase the steelmaking product from Iron Ore Holdings’ (IOH) Phils Creek mine, 90 km from Newman in the Pilbara region of Western Australia.
“It (the agreement) 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.
A host of companies led by Fortescue Metals Group are seeking access to the railways of Rio Tinto and BHP Billiton in the Pilbara to export iron ore amid rising prices for the commodity.
“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,” Walsh said.
The National Competition Council (NCC) has called for public comment on its draft recommendation that three separate railways, including Hamersley Rail owned by Rio Tinto Iron Ore, be opened for access by third parties to improve competition in the iron ore haulage market.
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 in the feasibility stage, but it is envisaged the operation will produce about 1.5 Mtpa from the second half of 2010.