Right place at the right time

WITH the first shipment of iron ore from the BC Iron and Fortescue Metals Group Nullagine joint venture, FMG has cemented its reputation as the only major keen to do deals with junior parties, and FMG boss Andrew Forrest has said the company’s door is open to more emerging players. But this also means FMG’s success is vital to the juniors of the Pilbara.Last week the first shipment from the Nullagine joint venture was loaded onto the MV Zosco Dailian ship from FMG’s Anderson Point facility. FMG boss Forrest and BC Iron managing director Mike Young were on deck for the first loading of BC Iron’s fines product, which grades 57.8% iron and 2% alumina, headed for steel mills in China. The 20,000t load – out of 180,000t of capacity on a capesize vessel which will be fully utilised by FMG’s own ore – will be marketed by FMG’s team in China as part of the joint venture deal between the two companies.While it was a big day for BC Iron as the Pilbara’s newest iron ore exporter, Forrest was keen to talk up the historic significance of the ship-loading for the state and the nation. While Rio Tinto has quibbled with FMG’s suggestion this marks the first time third-party infrastructure access has been fully utilised for iron ore, pointing to its JV with Hancock Prospecting, it is the first time a junior has managed to export iron ore through a major company’s rail and ports.And the timing couldn’t be more apt as FMG is once more into court to do battle with Rio Tinto and BHP Billiton in the Federal Court with the launching of an appeal last week against a decision by the Australian Competition Tribunal. Last year the ACT ruled that rail lines owned by the majors in the Pilbara were not open to be used by smaller miners. FMG has been battling the two other majors for six years and last week Forrest said he would continue fighting for third-party rail access even though he admitted his company did not now need to access the railways of BHP and Rio even to develop its further iron ore plans.“I suppose, from a raw economic basis, we could well have survived without the distraction of making a raw assault on companies to get them to obey the law,” Forrest said.“Rio and BHP say to us often, you don’t really need it, but yes, we do. We’re a member of the Australian economy. You got permission to build your rail lines under obligation to share them so share them.”Despite this, Forrest said that Rio and BHP had “never had an opponent with deep pockets” and the company would continue to prosecute its right to access.Given FMG’s own fight with Rio and BHP, as symbolic as it may have become, FMG clearly needs to also live up to its own ideals when it comes to allowing access and Forrest said the company was currently in discussions with another four juniors, including Brockman Resources, over access to its port and rail infrastructure.He told journalists it would be to his great satisfaction to help every single junior in the Pilbara, casting it as an economic imperative for Australia.“It’s a finite demand, in the past eight years, Australia has lost market share, and considerable market share to China, and that has had an impact on every single Australian,” he said.BC Iron’s Young said he recognised very early on that FMG represented his company’s only real chance of getting into production. He said FMG was one of the very first groups he contacted when he began working on the Nullagine project.“It’s infrastructure – it’s the thing you’ve got to focus on. A lot of the [juniors] are drilling, drilling drilling, they’ve got a hundred million tonnes, but they haven’t got the infrastructure sorted out,” he said.Future deals between FMG and junior plays might not necessarily take the same form as the arrangement between BC Iron and FMG, according to Forrest, who pointed to the different agreements FMG has with Atlas Iron and PMI.“Mike [Young] wanted to build a mining company and that was going to take a fair bit of cash and expertise which he didn’t have,” Forrest said. “We were able to do that and if we can do that with other companies ... they’ll all be different, but they all will be extremely value accretive to the company who we’ll do the deal with.”And the junior iron ore industry is clearly also riding on FMG’s successes in growing its business, opening up further rail lines, and seeking additional tonnes for the market.One company which has every reason in the world to want to do business with an expansionary FMG is junior Iron Ore Holdings, especially given FMG’s announcement this week of a 1 billion tonne resource at the Nyidinghu project. Only 35km from FMG’s existing Cloudbreak mine, it is also right next door to Iron Ore Holding’s Iron Valley project.A broker’s note from Ocean Equities this week said there were “compelling technical and infrastructure synergies between IOH’s Iron Valley project and the Nyidinghu project”Analysts at the firm also said IOH’s Iron Valley project looked like a good fit with FMG.“We believe Fortescue is the natural owner and developer of Iron Valley in a similar way to BHP Billiton being the natural owner and developer of UMC’s Railway deposit (acquired in October 2009), with a number of strategic parties having completed due diligence on the Iron Valley asset,” the brokerage said.According to Ocean Equities, IOH currently holds the fifth largest high grade direct shipping ore inventory in the Pilbara behind RIO, BHP, FMG and Hancock Prospecting.

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