BC Iron and Fortescue agree for trial of new rail and port tariff system in Australia

26 October 2015 (Last Updated October 26th, 2015 18:30)

BC Iron and Fortescue Metals Group have agreed to link the tariff for using Fortescue's rail and ports with the market price of iron ore in Pilbara, Australia.

BC Iron and Fortescue Metals Group have agreed to link the tariff for using Fortescue's rail and ports with the market price of iron ore in Pilbara, Australia.

Under the agreement, the mining firms' Nullagine joint venture (JV) company has agreed to trial a new tariff system for use of rail and port services to Pilbara Infrastructure (TPI) in Australia, a subsidiary of Fortescue.

NJV uses Fortescue's infrastructure at Christmas Creek, 50km south of the Nullagine mine, to transport up to 6Mtpa of ore through rail to Port Hedland.

Under the new tariff mechanism, effective from 1 November for a period of three months, the JV will pay a tarrif to TPI based on the iron ore prices prevailing in the market, this implies that the rail and port tariff will reduce at a time when the iron ore prices are low and vice-versa.

"This is a positive outcome for BC Iron and reflects a cooperative approach between Fortescue and BC Iron given the current market environment.

BC Iron managing director Morgan Ball said: "This is a positive outcome for BC Iron and reflects a cooperative approach between Fortescue and BC Iron given the current market environment.

"The variation to rail and port charges will have the effect of lowering the iron ore price at which BC Iron can continue to generate positive cash flows from the NJV."

The tariff will reduce for months where the benchmark iron ore price is less than $56 per tonne and increase for months where the price is more than $56 per tonne.

Fortescue CEO Nev Power said: "We have a strong, long-term relationship with BC Iron and welcome the opportunity to trial this innovative new tariff mechanism, which we believe serves both parties well.

"Today's announcement is a further example of Fortescue's willingness to provide access to its world class infrastructure on commercial terms, strengthening our collaborative approach to working with our partners in the Pilbara region."

BC Iron has assets in the Pilbara region of Western Australia, including the NJV, Iron Valley operated by Mineral Resources and Buckland development project located in the West Pilbara region.