FMG to develop $1.34 billion iron ore mine, railway, and port system

FMG to develop $1.34 billion iron ore mine, railway, and port system

Australia-based Fortescue Metals Group (FMG) has appointed Worley Group Ltd. to conduct a detailed feasibility study on FMG's planned A$1.85 billion ($1.34 billion) iron ore mine, railway, and port system in the Pilbara region of Western Australia. FMG aims to have the feasibility study completed by the first quarter of 2005, which would enable the first iron ore deliveries by mid-2006 to early-2007. Meanwhile, FMG has also requested Australia's National Competition Council to open up the existing rail networks controlled by Rio Tinto and BHP Billiton to all third parties. FMG's CEO Andrew Forrest claims that this ’duopoly' has caused Australia to lose out to competitors such as Brazil, despite Brazil's higher freight charges to move raw iron ore from South America to China. Mr. Forrest announced that the company has received strong support for the development of its iron ore mine system from all over the world, but particularly from China. Rio Tinto and BHP Billiton currently dominate iron ore exports from Australia and Mr. Forrest states that FMG has received a lot of support from Chinese steel mills for the development of another supply source. China would like to gain control over the price it is charged for iron ore. Accordingly, the development of more iron ore resources is a definitive part of China's commodity price control program. FMG currently owns 15'000 square kilometers of iron ore reserve area in the Pilbara region of Western Australia which it intends to develop into iron ore mines following the completion of the feasibility studies. The planned project includes a $525 million iron ore mine with a 45 million mt/year capacity and a $1.27 billion infrastructure project involving a 55-kilometer railway line and a port with shiploading facilities capable of handling up to 100 million tons per year.