Fortescue Ordered to Cut Railway Prices for Rivals

Monday, September 16th, 2013
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Iron ore giant Fortescue Metals Group has been told by government regulators to amend the price scheme it had originally planned to apply to usage of its Pilbara railway network by a rival miner.

The West Australian Economic Regulation Authority (ERA) has announced that the total costs Fortescue would be able to apply to its railway line for usage by iron ore miner Brockman Mining would be in the range of $84.7 million to $316.9 million.

Fortescue had originally hoped to charge Brockman Mining up to $576 million for access to its Pilbara Infrastructure (TPI), which is the only iron ore rail line in Western Australia required to be accessible to other mining firms.

These price ranges are considered applicable to the full capacity of the Pilbara railway, and not just the 20 million tonnes of annual capacity that Brockman wished to used as opposed to recent media reports.

While ERA chairman Lyndon Rowe says that following the setting of the cost range Fortescue is bound to commence negotiations, the iron ore giant has since said that it does not believe this is what the ruling entails.

Fortescue says that the Western Australian railways access code does not require TPI to commence negotiations with Brockman until it can demonstrate that it possesses the financial wherewithal and managerial competence to proceed with the its development.

Rowe’s response to Fortescue’s claim is that the company must include financial and managerial capability within negotiations, instead of an excuse to stall their commencement.

Brockman CEO Russell Tipper said in a statement that he was pleased with the ERA’s ruling, which would give Brockman a better chance to show that its project is financially viable.

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