BHP Billiton Iron Ore boss Ian Ashby has scoffed at an obligation to haul junior companies’ Pilbara iron ore, saying the miner would never build “latent” rail capacity and therefore could avoid having to help its smaller peers develop their deposits.
Describing the third-party haulage obligation, under various BHP-held State Agreements, as a moot one, Mr Ashby said his business was operating at full capacity and any expansion of its Pilbara infrastructure would be solely to meet its own demand.
Mr Ashby’s comments, after presenting at the Diggers & Dealers conference in Kalgoorlie-Boulder yesterday, may anger the Pilbara juniors who are struggling to develop their iron ore deposits because of a lack of available infrastructure.
Already there is talk — albeit of a conceptual nature only — of a Chinafunded railway project from Port Hedland into the central Pilbara to access some of the juniors’ deposits and aggregate a sizeable Chinese-controlled volume of iron ore to reduce the Middle Kingdom’s reliance on BHP and Rio Tinto for the steel-making commodity.
BHP and Rio have to haul other parties’ ore, as stipulated in various State Agreements covering their Pilbara operations. But they have been refusing to honour the obligation, pointing to a caveat that haulage only applies if there is spare capacity.
In a rare public appearance, Mr Ashby made clear he had no intention of making room on his railways to allow juniors to transport their ore to the coast.
“Our obligation is to our shareholders and our facilities are running flat out,” he said. “We don’t have any excess capacity (and) ostensibly, that will be the case. We don’t make our investments so that we have what I would call latent capacity. We don’t have spare capacity that we won’t within a reasonable amount of time consume with our own growth.
“Given the growth in the demand for iron ore, and our obligation to our shareholders, maybe it (the haulage obligation) is a moot point.”
Mr Ashby’s comments will also put him at loggerheads with Premier Colin Barnett, who is likely to use the proposed BHP-Rio Pilbara joint venture to force through changes, including the axing of concessional royalties and enforcement of the third-party haulage regime.
Parliament will have to sign off on changes to the State Agreements that are required for BHP and Rio to extract $US10 billion of synergies.
Mr Ashby said he was yet to discuss potential joint venture expansion with Rio because both sides were still awaiting a response from the European Commission.
The commission, which looms as the biggest obstacle, has to approve the venture but Mr Ashby said he was confident the tie-up with Rio would proceed by mid-2010.
Mr Ashby would also not commit to a costly Port Hedland outer-harbour expansion in the event the Rio joint venture went ahead.
