Mid-tier Australian Iron Ore Miners Push for $2.1 Billion Development at Port Hedland to Bypass BHP and Rio Tinto

---

Researched by Industrial Info Resources (Sugar Land, Texas)--The North West Iron Ore Alliance (NWIOA) (Nedlands, Western Australia), which is a group of mid-tier Australian iron ore mining companies, is pushing for a $2.1 billion development at Port Hedland, Western Australia, to bypass the export facilities that it feels are controlled by mining giants BHP Billiton Limited (NYSE:BHP) (Melbourne, Australia) and Rio Tinto plc (NYSE:RTP) (London, England).

The NWIOA is made up of Atlas Iron Limited (ASX:AGO) (West Perth, Australia), Brockman Resources Limited (ASX:BRM) (Subiaco, Australia), and FerrAus Limited (ASX:FRS) (Adelaide, Australia), and was formed in 2007. Each of the three companies is involved in the exploration and development of iron ore projects in the Pilbara region of Western Australia.

Between them, the three companies are believed to control about 1.6 billion tons of high-grade hematite ore deposits and some 2 billion tons of magnetite deposits, with a combined production capacity expected to reach 50 million tons per year by 2013.

According to a pre-feasibility study performed by the NWIOA, a development at Port Hedland with a 50,000-ton-per-year capacity would be sufficient to meet the export needs of the alliance and allow the member firms to bypass the facilities dominated by BHP and Rio Tinto.

As the next stage in the process, the NWIOA intends to begin a definitive feasibility study that will include, according to a statement issued by the NWIOA, an "in-depth assessment of the various funding alternatives."

Approvals for the development would be sought at the same time as the feasibility study, the alliance said; it indicated that if approved, the facility could be operational by the second half of 2013.

In a related operation, Atlas has moved to obtain greater port capacity allocation by completing a deal with junior iron ore company Aurox Resources Limited (ASX:AXO) (Subiaco, Australia). Aurox recently completed a $12.6 million payment toward prepaid facility charges to the Port Hedland port authority for capacity at the Utah Point port facility, which is under construction at Port Hedland.

Atlas is believed to have provided the loan funds to enable Aurox to complete the deal, in return for which Atlas will gain access to 6 million tons per year of export capacity from March 1, 2012, increasing to 10 million tons annually by 2015.

In addition to dominating the export facilities at Port Hedland, BHP and Rio together will operate a rail network in the Pilbara region, but this exclusiveness is also under pressure from the NWIOA. Despite objections from BHP and Rio, the Australian Competition and Consumer Commission (ACCC) has granted conditional approval to the NWIOA to enter into collective bargaining over access to the rail network.

The ACCC believes that collective bargaining, as opposed to individual companies entering into negotiations with service providers, is likely to lead to cost savings. However, although the ACCC has granted approval to the NWIOA to begin bargaining with Rio and BHP on such topics as rail access pricing, participation in negotiations is voluntary for both sides.

Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy related markets. For more than 26 years, Industrial Info has provided plant and project spending opportunity databases, market forecasts, high resolution maps, and daily industry news.