Iron ore juniors forge Pilbara pact
Both companies have high-quality iron ore close to where BHP Billiton and Rio Tinto have their biggest money-spinners, but the two juniors lack transport and export infrastructure to get their product to market.
On Thursday they announced an agreement to work together on securing export solutions, in a bid to keep costs low and achieve economies of scale by aggregating their volumes of iron ore.
Despite the agreement being non-binding at this stage, leaders of both companies told BusinessDay that a full financial merger was one of several possible outcomes of the negotiations that will now take place.
"We will look at all the options," said Flinders Mines executive chairman Bob Kennedy.
"There are many ways in which you can deal with this, it could be mine gate sales agreement, a joint venture on properties, it can be by merger, but we are yet to work out what is going to be equitable and fair for all shareholders.
"The goal here is path to market; we want to catch the train to the beach and put our luggage on the ship, that's really what it is all about."
Similar comments were made by Brockman chief executive Russell Tipper, when asked if he thought a merger could be the result of imminent talks.
"That may well be a potential outcome, but it's just one of many ways in which we might be able to work together in order to aggregate the tonnes," he said.
If completed as a merger, it would be the first case of merger and acquisition activity in the Pilbara iron ore sector for more than two years, since Atlas Iron acquired FerrAus.
The combined market capitalisation of Brockman and Flinders is more than $500 million.
Thursday's agreement is the latest bout of corporate positioning in the Pilbara, where companies are rushing to get their iron ore into the market before the expected fall in prices.
Brockman and Flinders have both applied for access to the railway owned by Fortescue Metals Group.
Frequently Asked Questions about this Article…
They announced a non-binding agreement to work together on securing export solutions for their Pilbara iron ore projects. The pact is aimed at aggregating volumes to keep costs low and achieve economies of scale while they negotiate more detailed commercial arrangements.
Company leaders have said a full financial merger is one possible outcome of the talks, but the agreement is non-binding and negotiations are ongoing. A merger is one of several options being considered alongside other commercial arrangements.
Brockman and Flinders want to aggregate iron ore volumes to achieve economies of scale and lower costs. Combining volumes can make export solutions more viable by spreading transport and infrastructure costs across greater tonnages.
Both companies have high-quality iron ore near major miners but lack their own transport and export infrastructure. To address this, they have applied for access to the railway owned by Fortescue Metals Group as part of efforts to secure a path to market.
Executives have mentioned a range of possible arrangements, including mine gate sales agreements, joint ventures on properties, or other commercial deals that would be equitable and fair for shareholders — with a merger being just one potential route.
The combined market capitalisation of Brockman and Flinders is reported to be more than $500 million, reflecting the scale of their combined Pilbara positions.
If completed, it would mark the first merger and acquisition activity in the Pilbara iron ore sector for more than two years, the last being Atlas Iron's acquisition of FerrAus, making it a notable development for regional deal activity.
Investors should watch for outcomes of the negotiations—whether they progress to access agreements (like rail access), mine gate sales, joint ventures, or a formal merger. Because the current pact is non-binding, look for definitive announcements and shareholder approvals before assuming any transaction will occur.
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