Brockman seeks Fortescue rail access
Andrew Forrest's long campaign for open railways in the Pilbara has come full circle, with a junior iron ore company boldly asking West Australian regulators to grant it access to the railway owned by Mr Forrest's Fortescue Metals.
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.