Atlas rail deal mooted
Atlas executives have left analysts with the impression that a deal to transport its iron ore on Fortescue's railway line will be struck within three months.
That timeline coincides with the schedule that Fortescue has outlined for the sale of a minority stake in its rail and port assets.
While Atlas will not be a buyer of that $2 billion to $3 billion stake, a sale to an infrastructure company or pension fund looks likely to facilitate an arrangement where another miner uses Fortescue's railway.
Atlas has about 30 million tonnes of growth assets located more than 400 kilometres south-east of Port Hedland, but close to the railways of both Fortescue and BHP Billiton.
After meeting Atlas' chief financial officer, Anton Rohner, this week, Bank of America Merrill Lynch analyst Peter O'Connor wrote to clients saying: "[Atlas] expect to be able to do a deal with FMG/TPI. Sounds like they expect to make an announcement on this in the next two-three months."
Atlas has been working with Aurizon and Brockman Mining on a study into the feasibility of building a new multi-user railway in the Pilbara, and while that report is due soon, most pundits believe the concept will not be realised.
Iron ore prices are widely tipped to fall as supply volumes rise over the next two years, and construction of a new railway may take too long for exporters desperate to cash in on the last of the high prices.
When asked if a deal with Fortescue was firming as the most likely option for Atlas, chief executive Ken Brinsden said; "We are absolutely open-minded to all the options but it's hard to ignore the fact that FMG already has a rail network on the ground, there's no point avoiding that."
Negotiations between rival companies over access to railways in the Pilbara have been notoriously difficult over the past decade, but the recent cooling of the iron ore sector appears to be breaking down barriers.
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Atlas badly needs a positive driver for its share price, which reached its lowest point in more than four years on Friday at $1.17.
The share price is now lower than it was in September when iron ore dropped below $US87 a tonne, despite the current benchmark iron ore price being quoted as $US134.
Frequently Asked Questions about this Article…
The article says Atlas Iron appears close to striking a deal to transport its iron ore on Fortescue Metals Group's railway. Atlas executives signalled to analysts that an arrangement to use Fortescue's rail line could be announced within about two to three months.
Fortescue has outlined a plan to sell a minority stake worth about $2 billion to $3 billion in its rail and port assets. The article notes Atlas would not be the buyer, but a sale to an infrastructure company or pension fund could make it easier for another miner—like Atlas—to secure access to Fortescue's railway.
Atlas has roughly 30 million tonnes of growth assets. Those deposits are located more than 400 kilometres south‑east of Port Hedland but are close to the existing railways of both Fortescue and BHP Billiton, which is why rail access is strategically important.
Bank of America Merrill Lynch analyst Peter O'Connor, after meeting Atlas CFO Anton Rohner, wrote that Atlas expects to be able to do a deal with FMG/TPI and sounded likely to announce it in the next two to three months.
Atlas has been working with Aurizon and Brockman Mining on a feasibility study for a new multi‑user Pilbara railway, and a report is due soon. However, the article says most pundits believe the new railway concept is unlikely to be realised, partly because it would take too long.
The article notes iron ore prices are widely tipped to fall as supply volumes rise over the next two years. Because constructing a new railway can take a long time, exporters may not benefit from the remaining period of high prices, making existing rail access deals more attractive.
Atlas badly needs a positive driver for its share price, which fell to a more than four‑year low of $1.17. The article implies that confirming rail access to Fortescue's network could be a meaningful catalyst for Atlas shares.
Negotiations over rail access in the Pilbara have been notoriously difficult over the past decade. The article suggests the recent cooling in the iron ore sector appears to be breaking down barriers, making access agreements—like the potential Atlas–Fortescue deal—more likely.
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