BC Iron has announced that it has reached an agreement with Fortescue Metals to set the tariffs for using Fortescue’s rail and ports to the market price for iron ore.
The two companies have agreed on a three month trial at their Nullagine joint venture in the Pilbara region of Western Australia.
The Nullagine mine is 75% owned by BC Iron and 25% owned by Fortescue. The Nullagine Joint Venture (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.
Thanks to the new tariff arrangement, BC Iron expects to save $2.3 million for the three month period.
“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. Although the tariff does increase at higher iron ore prices, BC Iron still retains some exposure to this upside,” said BC Iron Managing Director, Morgan Ball, in an ASX Announcement.
“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,” added Fortescue Chief Executive Officer, Nev Power.