BHP's secret Port Hedland capacity deal

13 Nov, 2013 07:30 AM
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Port Hedland is Australia's busiest port.
Port Hedland is Australia's busiest port.

A SECRET agreement between BHP Billiton and the Port Hedland Port Authority could play a key role in which companies are allocated port capacity in the future.

The Australian Financial Review understands that BHP and the Western Australian government, which runs the port at the mining town, signed a deal known as the Harriet Point Agreement in the mid-2000s.

The deal – which is confidential – is believed to effectively guarantee that any additional users would only be granted permission to use the port if it could demonstrate it would not damage BHP's efforts to ramp up production to 240 million tonnes a year.

BHP is understood to have no right to veto any attempted access but it could mean the world's largest resources company can influence and urge the port authority not to agree to granting access to another provider if they believe it effect its expansion plans.

Port Hedland, Australia's busiest port, which accounts for 20 per cent of global iron ore exports.

The WA ­government is quietly exploring ways of opening up access to the critical ­infrastructure that would encourage production by second-tier iorn ore ­miners.

North West Infrastructure, which includes Atlas Iron and Brockman Mining, is seeking a rail provider to enable them to develop and utilise its promised 50 million tonne a year berth.

Rail and port operator Aurizon Holding is also competing for the space as part of its bid to expand into the ­Pilbara and appeal to junior iron ore miners.

BHP declined to comment on ­Tuesday. The WA Government could not be reached.

In its September operational review, BHP announced it had maintained its strong momentum during the quarter as iron ore production increased by 11 per cent on the prior corresponding quarter. BHP chief executive Andrew Mackenzie noted that its efforts to optimise the iron ore business had already paid off and resulted in its 2014 financial year production guidance raised to 212 million tonnes.

BHP iron ore expansion, the development of Gina Rinehart's $10 billion Roy Hill iron ore mine and intense competition for port space comes as the spot iron ore price is trading at $US135.9 a tonne. Many experts were predicting the steel making commodity's price would fall in the past three months as extra supply hit the market and Chinese demand was predicted to wane. Given NWI's port berths remain undeveloped, the allocation is coveted by BHP, Fortescue and Hancock Prospecting, as they expand.

The Australian Financial Review last week revealed the Atlas Iron and Brockman Mining were at risk of losing their crucial port allocation at Port Hedland, unless they met infrastructure development goals currently being pursued by the WA government. Colin Barnett, the WA Premier, said a time line for the development of the two berths was being negotiated with the state and the Port Hedland Port Authority.

On Friday, Fortescue announced it believes capacity at Port Hedland is higher than the stated 495 million tonnes, adding, however, that it should be allocated only to users with funding and development certainty.

"We believe the current guaranteed priority allocation of 495 million tonnes a year substantially under­estimates the potential export capacity of the Inner Harbour," a Fortescue spokesman said.

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NO ships with live animals should be leaving Australia. This industry is animal abuse and animal
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we are happy to have Aldi in katanning doing business with WAMCO we also wanted and in great
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This is a disgrace but what can you expect from a Liberal Government that insists on making