QR National Studying Pilbara Iron Ore Railway Plans -Sources
October 31 2011 - 10:25PM
Dow Jones News
Australia's largest coal hauler QR National Ltd. (QRN.AU) is
looking at grabbing a share of the $150 billion global iron ore
market with plans to develop a rail operation in the country's
Pilbara region, according to three people with direct knowledge of
the situation.
QR National, which carried 182 million metric tons of coal from
mines along Australia's east coast in the year to the end of June,
has an internal team studying the Pilbara rail project and has
hired former BHP Billiton Ltd. (BHP) uranium head and Lihir Gold
Ltd. Chief Executive Graeme Hunt to consult on its options.
The project would open up prospects for smaller miners at a time
of rising iron ore demand. Australia's ore exports are expected to
near-double by 2015, and the Pilbara already accounts for 40% of
the 1 billion tons a year of iron ore traded globally by sea.
It would also assist QR's move into an area enjoying higher
profit margins than its coal business.
"Looking in the growth areas that leverage QR's capabilities,
there's only a couple of big spaces where they could do this," said
one person familiar with QR's strategy.
The three largest miners in the Pilbara--Rio Tinto PLC (RIO),
BHP, and Fortescue Metals Group Ltd. (FMG.AU)--each operate their
own rail lines to transport ore from inland mines to three ports
along Australia's northwest coast.
The vast cost of building such infrastructure has largely kept
smaller competitors out of the market, and major miners have been
reluctant to open up their lines to potential rivals.
Several miners have mooted building their own tracks. Hancock
Prospecting Ltd., controlled by mining tycoon Gina Rinehart, was in
July granted a license for a track that would carry 55 million tons
annually.
Atlas Iron Ltd. (AGO.AU), which carries six million tons
annually in trucks, wants to raise its output to 46 million tons
through a rail project, while Hong Kong-based Wah Nam International
Holdings Ltd. (0159.HK) has also suggested building its own
track.
An industry executive familiar with the discussions said a more
likely model would include several of these smaller miners, plus
equity stakes from non-mining investors such as Asian consumers or
infrastructure specialists.
"You need 80 million tons-90 million tons a year travelling on
the railway to justify its construction," the executive said.
QR has previously mooted taking an equity stake in Oakajee Port
and Rail, a troubled iron ore export project in the Mid West region
south of the Pilbara. The company carries 8.5 million tons a year
of ore from Cliffs Natural Resources Inc.'s (CLF) Koolyanobbing
mine east of Perth, making it the largest third-party iron ore
hauler in Western Australia state.
-By David Fickling, Dow Jones Newswires; +61 2 8272 4689;
david.fickling@dowjones.com
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