UPDATE: New QR National Railway Could Open Australia's Pilbara
April 25 2012 - 8:51PM
Dow Jones News
Freight rail operator QR National Ltd. (QRN.AU) is considering a
new railway in west Australia that could dramatically change the
face of the remote iron ore-rich Pilbara, connecting smaller mining
companies with export markets through a major port.
The company has signed a binding pact with mining company Atlas
Iron Ltd. (AGO.AU) to conduct a feasibility study for a railway
open to multiple users, running from iron ore deposits in the east
and southeast Pilbara to Port Hedland, QR National said
Thursday.
Access to the port would be a significant boost for junior
companies, potentially opening the Pilbara and bypassing the
tightly controlled rail lines of mining giants Rio Tinto PLC (RIO)
and BHP Billiton Ltd. (BHP), which have fought off attempts to
access their rail lines. The Pilbara already accounts for roughly
two-thirds of global shipments of the steelmaking commodity by sea,
much of it destined for China.
Ken Lewsey, vice president of strategy and business development
at QR National, said the Pilbara offers one of the company's best
growth opportunities. The company currently operates rail lines
from coal mines across eastern Queensland state.
"The value of an independent railway is that we can achieve the
economies of scale by aggregating the tonnages of multiple parties,
as well as delivering efficiency gains across a coordinated supply
chain," Lewsey said.
QR National and Atlas Iron have been informally working on plans
for a railway since last year. The rail company said it is expected
that Atlas would be a cornerstone user of a new railway that would
serve its deposits and those of other mining companies in a staged
development.
"The work done to date demonstrates this proposal has merit. It
is now time to put it through the commercial and operational
rigours of a joint study," Lewsey said.
Under the terms of the agreement, the two companies will share
costs and resources for a study to be completed by the end of the
year.
Atlas separately said rail is a key part of its plans to expand
production capacity to as much as 46 million tons a year, and the
new railway could begin haulage by 2015. It shipped 2.85 million
tons in six months through December.
"The potential development of an independent Pilbara rail
network could represent a paradigm shift for the progressive
development of the Pilbara, breaking open long-standing barriers to
new entrants to the iron ore industry," Atlas Managing Director Ken
Brinsden said.
-By Robb M. Stewart, Dow Jones Newswires; +61 3 9292 2094;
robb.stewart@dowjones.com
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