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Tussle over iron ore

01 Aug 2000

WITH Pacific Rim economies recovering swiftly from the 1998-99 recession, pressure is mounting to open up new sources of iron ore in the Pilbara region of Western Australia. Two of these are located at West Angelas and Hope Downs, both 400 km from the sea but within easy reach of existing railways owned by Rio Tinto subsidiary Hamersley Iron, and BHP Iron Ore (map, RG 6.99 p382). The problem is that the West Angelas ore body has been secured by North Ltd subsidiary Robe River Iron Associates, and Hope Downs by a Hancock-led consortium that includes South African steelmaker Iscor.

Last year, North and Hope Downs failed in a federal court action to secure open access rights to the Hamersley Iron Railway, and by inference to BHP-IO. Earlier this year, North announced that it would build a new 342 km railway to West Angelas paralleling HIR tracks; this would branch off Robe River's line to Cape Lambert. Hope Downs welcomed this decision because WA Resources Minister Colin Barnett had said his government would insist that other mine owners must be able to use the line. Barnett had previously announced in May 1999 that he wanted to see three independent producers in the Pilbara achieve 'a mature long term production level' of 200 million tonnes a year.

But this A$430m project was put in doubt at the end of June 2000 when Rio Tinto made a surprise takeover bid for North, which promptly advised shareholders to reject it. Obviously, Rio Tinto would expect West Angelas to be served by a new branch off HIR's line to Yandi, opened in December 1998. Surprisingly, Barnett's response was that he had no objection to North being swallowed by Rio Tinto so long as a third independent producer (presumably Hope Downs) was also allowed by Rio Tinto to use HIR. However, it is by no means clear that Rio Tinto's bid for North will succeed, and Barnett is not in a position to force Hamersley or BHP-IO to open its tracks to a competitor.