Atlas Iron poised to expand Pilbara port access

The article says Atlas Iron is expected to benefit from a port capacity allocation arrangement with junior Aurox Resources. Aurox paid pre-paid facility charges to secure export capacity at Port Hedland, and Atlas provided loan funds to Aurox to make that payment — a move that could give Atlas extra access to Pilbara port capacity.

Both companies went into trading halts pending announcements. Atlas said its halt was due to a "potential material transaction," while Aurox said its halt was pending an announcement on a "price sensitive transaction," according to the article.

Aurox paid a final instalment of $12.6 million for pre-paid facility charges to the Port Hedland authority, securing access to 6 million tonnes of annual export capacity from 2012 and rising to 10 million tonnes annually from 2015, as reported in the article.

The article notes Aurox is planning a $1.2 billion Balla Balla iron ore-vanadium development but that this planned project has not yet received approval. Because the development is not yet go-ahead, it is unlikely Aurox will use its port allocation in the early years.

Atlas’s ambitions in the Pilbara are limited by port infrastructure access. The suggested deal with Aurox is based on that premise: because Aurox has port allocation but is unlikely to use it immediately, Atlas — which is positioned to increase production — could take advantage of the allocation to expand exports.

An Indian newspaper triggered speculation that a consortium including India’s NMDC, Saudi ABS Consulting and locally listed Boulder Steel had made a $230 million offer for a stake in Atlas’s Ridley magnetite project. The article says analysts considered that speculation "wide of the mark," and notes Atlas has previously said it plans to eventually sell a controlling stake in Ridley while focusing on direct-shipping iron ore projects in the Pilbara.

The North West Iron Ore Alliance, of which Atlas is a member, completed a pre-feasibility study into a proposed Port Hedland port costing $2.1 billion with a capacity of 50 million tonnes a year. The study found the project could be operational in the second half of 2013, according to the article.

Key takeaways from the article: Atlas and Aurox entered trading halts pending material announcements; Aurox has paid $12.6 million to secure Port Hedland capacity (6 Mtpa from 2012, rising to 10 Mtpa from 2015); Atlas loaned funds to Aurox and could use the allocation to grow Pilbara exports; Aurox’s own Balla Balla project is not yet approved so it may not use the allocation early; and a broader 50 Mtpa Port Hedland proposal has a $2.1 billion pre-feasibility study with potential operation in H2 2013.