The recent
disputation between Rio Tinto and Casaly over the Shovelanna iron ore deposit
in the Pilbara has again exposed the nonsense of BHP’s claim that its rail network
does not have the capacity to carry the iron ore of third party producers. The Pilbara railways were created as a result
of agreements entered into by iron ore companies with the State government and
a principal condition of each agreement is that the railways be available to
carry freight for third parties.

The reason
for the third party access condition is blindingly obvious. It would be an
enormously expensive waste to require each producer to have its own rail
network. Equally, there are many minor deposits within the Pilbara which
collectively are worth billions of dollars but standing alone are not
economically feasible.

Generous approvals
for the railways were granted including the free grant of the land required
for the railway reserve. In spite of
this condition the two present iron ore producers have gone to extraordinary
efforts to deny access to any other companies.

They have
employed two tactics to deny third party access: The network does not have the
capacity for third party tonnage; the railway is part of the “production
process” within the meaning of the Trade Practices Act.

Curiously,
the dramatic increase in production by the operators of the networks has not
been an impediment to its carriage. BHP’s production has increased over the
years from five million tonnes per year to 110 million tonnes per annum in 2006. BHP’s
trains are presently running with a one hour twelve minute separation although
they are capable of a 36 minute separation. In any event, tonnage levels can be
very substantially increased by the construction of passing loops.

To claim
the rail network is part of the production process rather than the delivery
process is a nonsense. It is an argument used by both BHP and Rio. In 1999
Robe River Mining which was then 53% owned by North Mining Ltd sought
relief from this oppressive claim by a declaration under the Trade Practices
Act in respect to the Hamersley railway owned by Rio.

Curiously, Robe River suddenly
withdrew its declaration application only to be taken over two months
thereafter by Rio which uses its rail to
transport the Robe ore. Georgina Hancock’s Hope Downs has for years also been
denied access only to recently enter into a joint venture agreement with Rio
which includes Hope Downs production being carried over Rio’s net work.

BHP miraculously
found rail capacity on its network to enter into an arrangement with Casaly in
the event that Casaly had been successful in its attempts to wrest the
Shovelanna deposit from Rio. BHP agreed to purchase
and transport 5 million tonnes of wet crushed ore from Casaly with provisions
for increasing that amount.

BHP is
presently in fierce dispute with Andrew Forrest’s Fortescue Metals over BHP’s
refusal to allow Fortescue access to BHP’s rail network. Fortescue has a
deposit at Mindi Mindi from which it is proposing to export 5 million tonnes per
annum that requires only one returning train pathway per day. The deposit will
not be viable with a dedicated rail. BHP has refused Fortescue access to its
Newman line.

The
National Competition Commission has made a draft recommendation in favour of Fortescue
Metals’ application under the TPA to
access BHP’s railway. Its confidential final findings are now with the
Treasurer.

Peter Fray

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