Atlas Iron worried about Utah Point privatisation

Plans to sell the Utah Point shipping terminal at Port Hedland could result in higher fees and put smaller operators at risk, according to Atlas Iron managing director David Flanagan.

Speaking with the West Australian at the Atlas Iron annual meeting yesterday, Flanagan said privatisation of the Utah Point facility would not raise enough cash to assist with debt reduction and make the sale worthwhile.

“I think it’s actually worth much more to the Government if the juniors are filling it with ore and it’s been run cost-effectively and we’re all paying that dividend to the State Government,” he said.

“If someone pays $1 billion for it and they want to make a 5 per cent rate of return, they’ve got to double the charges to the juniors.”

“That will drive us out of business. We would close tomorrow.

“So if you can only pay $150 million for it to then make a rate of return, it’s not worth selling, the Government should keep it.”

In parliament of Thursday acting treasurer John Day said due diligence on the sale had assured government of a successful sales outcome, one which would be “in the public interest”.

Flanagan informed shareholders that Atlas had undergone cost-cutting measures over the past year, which included renegotiation of service contracts with contractors McAleese, Maca and Qube Logistics.

The director said Atlas would continue to generate profits with benchmark iron ore prices above $US47 per tonne.

Iron ore is currently selling around $US49.50, leaving margins slim for the WA junior, especially in light of projections of further descent to the $US40 mark.

Small steps for WA rail plan, says Aurizon

Iron ore producer Atlas Iron has welcomed a new railway in Western Australia’s iron ore Pilbara region, calling it a “fantastic solution”.

But builder of the railway Aurizon alerted it will not make any hasty decisions on the project.

Brockman Mining signed a three year agreement with Aurizon that will see it build and operate rail and port infrastructure for the company’s Marillana and Ophthalmia mines.

Aurizon will operate rail, rolling stock and related infrastructure required by the mine projects and build port facilities.

Brockman Mining signed a supply, infrastructure cooperation agreement in the Pilbara with Flinders mines. It said they will work together on a transport solution that will get their product to market.

Brockman Mining and Flinders mines have signed a supply, infrastructure cooperation agreement in the Pilbara, saying they will work together on a transport solution that will get their product to market.

The freight rail operator’s chief executive Lance Hockridge told ABC’s Inside Business Aurizon needs the backing of a couple of mining companies in order to go ahead with the $10 billion rail network.

Atlas Iron managing director Ken Brinsden agreed and said the project would require assistance from many customers to make it financially feasible, The Australian reported.

“We’ve made no secret that Atlas is not really in a position to justify rail in its own rights, so I would say that if a network like Aurizon is going to be able to get up in the Pilbara then there’s no doubt in my mind it needs multiple customers,” Brinsden said.

“It’s fair to say we’ve got a discussion going on with quite a few people and at the end of the day the Aurizon solution might very well constitute it: a fantastic solution for the Pilbara as a whole.”

Hockridge said the company needs to do more work before starting the project.

“The concept is essentially open access. It would be open to all corners, as opposed to being dedicated to individual miners.” he said.

“We come from a mindset that is a 30 to 40-year business. We’re very much in the early stages of our investigation and I don’t think that there’ll be any resolution of that any time soon.

“We’re focused on our concept and I emphasise again it’s at concept phase and we need to do a good deal more work.

“We’re encouraged by the progress so far but there are self-evidently a whole range of issues that we’ve got to get through before we get to anything which is more definitive.”

Atlas Iron pays an average of $13 a tonne to transport iron ore from the Pilbara mines to Port Hedland.

But Brinsden expects the price to dip to as low as 5c to 6c per tonne per kilometre if the rail lines are built like those on east coast coal networks.

“There’s an opportunity to be on the rail, and rest assured we’re working really hard to look for solutions like that so we can come up with a logical and commercial, more sophisticated infrastructure solution that makes sense for the growth of the business,” Brinsden said.

Aurizon said earlier this month it will slash costs by more than $230 million over the next two years, which will see job cuts and property sales. It said it would move to cut $70 million in labour costs over the next 24 months.

It is not known how many jobs will be affected.

The company has cut hundreds of jobs over the past year, with voluntary redundancies comprising most of it.

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