Pioneer of the
Australian Iron Ore
Industry

Rinehart and Ellison in iron ore pact

By Peter Ker courtesy of Australian Financial Review.

A rare bout of cooperation has broken out in Australia’s iron ore heartland, with billionaires Gina Rinehart and Chris Ellison agreeing to work together on a new iron ore export facility at Port Hedland.

The pact is designed to boost the two billionaires’ chances of winning a tender for a hotly contested slice of extra capacity within a section of Port Hedland called South West Creek, which has been eagerly awaited by the iron ore industry for over a year.

The Western Australian government was expected to award the capacity rights last year, but has made extremely slow progress on the decision, meaning the state missed an opportunity to ship more iron ore during this year’s boom in iron ore prices.

The capacity was set aside a decade ago for a cluster of junior iron ore aspirants, which have either folded or been acquired by the major Port Hedland tenants; Mineral Resources, Fortescue Metals Group, BHP and Mrs Rinehart’s privately held iron ore companies.

All four groups have applied for more capacity at Port Hedland in recent years, and the contest for the extra capacity in South West Creek has been viewed as a battle between Mrs Rinehart, Mr Ellison and Fortescue, which is chaired by another billionaire, Andrew Forrest.

If formalised, Monday’s pact would see Mr Ellison’s Mineral Resources Limited and Mrs Rinehart’s privately held iron ore companies study whether they can build an export facility that serves both companies in South West Creek.

The Roy Hill Iron Ore business, which is 70 per cent owned by Mrs Rinehart’s Hancock Prospecting, would provide rail haulage and port services to Mineral Resources and Mrs Rinehart’s Atlas Iron business.

The export facility would be built at Stanley Point Berth 3; a site in South West Creek previously reserved for Atlas Iron, which was acquired by Mrs Rinehart in 2018 after she beat Fortescue and Mineral Resources in a bidding war.

The pact will only go ahead if the pitch is successful in securing the extra capacity from the WA government.

Cooperation between iron ore miners in the Pilbara region of WA has been rare over the past 55 years, with Rio Tinto, BHP, Fortescue and Roy Hill all preferring to build their own railways to carry iron ore to port rather than share infrastructure.

In some cases the rival railways run just metres apart for hundreds of kilometres.

Fortescue famously fought in the courts to win access to the railways of its bigger rivals in the first decade of this century, but ultimately built its own.

A couple of isolated instances of infrastructure sharing have taken place – such as when BC Iron had its iron ore railed, marketed and exported by Fortescue for several years – but generally cooperation has been elusive, with Fortescue fighting hard to keep a junior called Brockman Iron off its railways between 2013 and 2017.

Brockman’s Marillana iron ore deposit is now shared with Mineral Resources which hopes to bring it into development in future.

“This partnership and infrastructure sharing is the first of its kind in the Australian resources industry,” said Mr Ellison of Monday’s pact with Mrs Rinehart’s companies.

The duplication of infrastructure in the Pilbara is in stark contrast to Queensland, where specialist rail companies such as Aurizon serve all miners in the Bowen Basin coalfields, and many of the ports are also multi-user.

Mineral Resources has previously expressed a desire to build two new berths with total capacity of 50 million tonnes in South-West Creek.

The company carries its iron ore to Port Hedland on trucks and was forced to downgrade exports earlier this year because of a severe shortage of truck drivers in WA.