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Pilbara lines in a tangle

01 Jul 1999

Confirmation on June 15 that Rio Tinto and BHP are negotiating a joint venture to merge their iron ore operations in Western Australia has introduced a new dimension to the increasingly bitter dispute with North Ltd over access to Rio Tinto's Hamersley Iron Railway. The news followed a May 27 declaration by WA Resources Development Minister, Colin Barnett, that the Pilbara region needed three independent producers to meet 'a mature long-term production level' of 200 million tonnes. Exports peaked at 152 million tonnes in 1997. 'I am not saying we'll have three producers only', he added, 'but there'll be effectively three iron ore projects with different mines, owners, rail and port systems - that will guarantee reliability of supply and it gives an infrastructure across the Pilbara.'

Up to now, each company has developed its own mines, railway and port, even though Rio Tinto's Yandicoogina mine is very close to the BHP railway. Instead of sending its Yandi output to Port Hedland on BHP's tracks and funding an increase in capacity, Hamersley spent A$235m on a 144 km extension through hilly terrain (RG 6.99 p382).

North's Robe River Railway is 342 km from the West Angelas ore it wants to mine. Building its own line would cost A$430m; plugging to HIR's Yandi branch would require only a fraction of that. Aside from the economics, WA's Environmental Protection Agency is deeply unhappy about creating a new rail corridor and wants Robe to stick close to HIR's route. But parallel single tracks would offer less capacity and flexibility than doubling HIR's line.

Now Hancock Prospecting wants to develop the Hope Downs ore deposit near Yandi - which has two independent rail outlets. Hancock proposes to use Robe's West Angelas branch - if it materialises.

On September 24 1998, Robe asked the National Competition Council to 'declare' HIR a 'rail service' subject to federal open access legislation. Hamersely applied on October 30 to the federal court for an order that it was not. Both decisions are awaited.

On May 25 Rio Tinto's Executive Chairman Robert Wilson said allowing Robe and/or Hancock to use HIR could 'severely disrupt' production. But a few days later, a leaked BHP report claimed a merger with Hamersley would generate savings worth A$1bn.