JENNY WIGGINS AND AYESHA DE KRETSER KEY POINTS The Queensland-based rail operator has linked with Atlas Iron on a move to expand in Western Australia. It now awaits the completion of a financial feasibility study. Much depends on other mine operators’ interest and Port Hedland expansion plans proceeding.
QR National has signalled its interest in supporting the development of Western Australia’s ports after striking a deal with Atlas Iron to try to establish a rail network in the Pilbara.
Ken Lewsey, QR National’s executive vice-president of strategy and business development, declined to comment on whether the rail operator would make a direct investment in new berths at Port Hedland.
But he said it was important for QR National to have “good alignment” with the ports and “the developments that are happening in that space”.
Mr Lewsey is confident several iron ore miners in the eastern Pilbara would use a QR National rail network if a study, due to be completed by the end of the year, shows it is financially viable.
“There are probably two or three strong prospects now,” he said. “But if you get a map out and look at the Pilbara and the tenements around those areas, there’s many more.”
He emphasised that the group was focused on the eastern Pilbara, rather than the western Pilbara.
Macquarie Securities has estimated it would cost at least $1.4 billion to $1.5 billion for QR National to build a rail line servicing mines up to 150 kilometres from Port Hedland.
But analysts say the development of a rail network would also need to be linked with the development of the South West Creek port berths at Port Hedland.
Royal Bank of Canada analyst Chris Drew estimates the first stage of developing berths would cost about $2 billion, and a second stage, needed to absorb increases in export volumes, would cost an additional $700 million.
QR National’s plans for expansion in WA come as the company, which was floated on the Australian Securities Exchange at the end of 2010, tries to diversify from its core coal haulage business in Queensland, which has been hurt by the east coast’s heavy rains over the past 18 months.
“We’ve got a great coal product but it’s nice to have some diversity,” Mr Lewsey said.
QR National now hauls only 3 per cent of the 420 million tonnes in iron ore exported annually, according to UBS. All of its WA haulage operations are in the state’s mid-west and south-west regions. It does not presently operate in the Pilbara.
Brockman Resources is among the iron ore miners that has indicated it would be interested in using a QR National network.
“We’ve had ongoing talks with QR for quite some time now and we’re very positive about using a third party service for our Marilanna project,” Brockman chairman Warren Beckwith said.
QR has indicated the line, which would be built in stages, could link Brockman’s Marilanna deposit, as well as Atlas’s McPhee Creek mine much further north, to Port Hedland by 2015.
But Mr Beckwith declined to comment on whether Brockman would take an equity stake in the project’s development.
“It’s too early to say whether that would be a possibility,” he said.
Like Atlas, Brockman remains in talks with existing rail owners like BHP and Rio over the possibility of accessing their rail lines.
Mr Lewsey claims the proposed rail network could benefit the Pilbara’s biggest miners by relieving pressure on them to open their own lines to smaller miners.
Atlas is already exporting 6 million tonnes of iron ore (which it transports by road from mines to ports) each year with relatively low capital investment and operating costs.
But analysts are concerned both will increase dramatically as exports expand to 15 million tonnes annually (without rail) and eventually to 47 million tonnes a year with QR National’s help.
Atlas will also be under pressure due to lower iron ore prices, which are expected to fall from present levels of $US150 a tonne level to about $US100 a tonne by 2015.
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