Brockman seeks Fortescue rail access
In what observers have described as an aggressive corporate move, Brockman Mining has applied for access to the railway through WA's Economic Regulation Authority, citing a 13-year-old law that has never been used in this way.
The move will complicate the sale process that Fortescue has been running for more than six months, in which the iron ore exporter has been negotiating the sale of a stake in its rail assets with haulage companies and wealth funds.
Brockman had been a participant in those talks, but failed to strike a rail access deal with Fortescue, and many observers believe Atlas Iron is instead close to winning rail access as part of a deal involving at least one other party.
Fortescue's railway is vulnerable to such an ambush because it was built after rules were introduced in WA in 2000 to create a process for third-party access to new railways.
Other Pilbara railways owned by BHP Billiton and Rio Tinto are not vulnerable because they were built before the rule was introduced, and those companies fiercely reject third-party access to their railways given that export infrastructure in the Pilbara is much rarer and more expensive than the iron ore itself.
Brockman chief executive Russell Tipper said the move would not come as a surprise to Fortescue, and nor should it be philosophically troubling for a company that famously fought through the courts for access to the railways of BHP and Rio.
"This is not an adversarial approach, this is simply following a process that not only have Fortescue agreed with, but they have publicly said they support," he said.
Brockman, which is controlled by Hong Kong investors previously known as Wah Nam, wants to use the line to export up to 20 million tonnes of iron ore, starting in 2016.
Under the process, Fortescue (through the wholly owned subsidiary that holds its rail and port assets) must suggest a "ceiling cost" to the regulator by May 22, representing what Fortescue believes is the maximum charges Brockman will pay for rail access. The regulator will then determine what it believes to be a fair price, before offering the two companies a ceiling and floor price to negotiate an outcome.
Failure to reach an agreement could see the matter sent away to arbitrators selected by the regulator, where a final price can be nominated. If unhappy with that outcome, Fortescue may have to challenge the issue in court.
Fortescue released a statement saying it was a strong proponent of third-party rail access, as shown by previous rail joint ventures struck with the likes of BC Iron. "Fortescue welcomes access discussions with third parties on a commercial basis that recognises the significant investment Fortescue has made in its world class infrastructure. Any access arrangement will require that the third party project is financially viable and capable of funding the additional infrastructure required," the company said.
Frequently Asked Questions about this Article…
Brockman Mining has applied to Western Australia’s Economic Regulation Authority for access to the railway owned by Fortescue Metals, invoking a 13‑year‑old WA law that observers say has not previously been used in this way.
Fortescue’s railway was built after WA introduced rules in 2000 creating a process for third‑party access to new railways, which makes it vulnerable to access applications — unlike BHP and Rio Tinto railways that were built before the rule change.
Brockman wants to use the Fortescue line to export up to 20 million tonnes of iron ore, with exports proposed to start in 2016, according to the company’s application.
Under the process, Fortescue’s rail‑holding subsidiary must propose a 'ceiling cost' — the maximum charges Brockman would pay — by May 22. The regulator will then set what it believes is a fair price and offer both companies a ceiling and floor price to negotiate. If they cannot agree, the regulator can send the matter to arbitrators.
Brockman’s application complicates a sale process Fortescue has been running for more than six months to sell a stake in its rail assets. Brockman had been involved in those talks but failed to strike a rail access deal, and observers suggest Atlas Iron may instead be close to securing access as part of a wider deal.
Fortescue says it is a strong proponent of third‑party rail access on a commercial basis. It welcomes access discussions that recognise Fortescue’s significant investment, and says any arrangement must involve a financially viable third party able to fund any additional infrastructure — noting it has done rail joint ventures in the past, such as with BC Iron.
Brockman chief executive Russell Tipper said the application should not surprise Fortescue and is not adversarial — he described it as simply following a process Fortescue has agreed with and publicly supported.
If the parties fail to reach an agreement under the regulator’s ceiling and floor framework, the matter can be referred to arbitrators chosen by the regulator, who can nominate a final price. The article notes Fortescue could challenge that outcome in court if it is unhappy.
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