• Roy Hill lobbed environmental approval documents with WA’s EPA this week for the Mulga Downs hub and rail spur
  • It would open up the development of 45Mtpa of third party Pilbara iron ore assets, including Gina Rinehart’s 20Mtpa Mulga Downs mine
  • Roy Hill is seeking FMG’s support to share a rail corridor with its Solomon rail line


Gina Rinehart  is reaching out to fellow iron ore magnate Twiggy Forrest  in her bid to develop a new iron ore mine on her family station in the Pilbara.

EPA approval documents were submitted this week for a new iron ore hub and rail spur to be operated by Roy Hill, the mining company 70% owned by Rinehart’s Hancock Prospecting, which ships 60Mt of iron ore from its mine of the same name out of Port Hedland each year.

The spur opens up around 45Mtpa of third party iron ore production for export through Hancock and Roy Hill’s expanded facilities at the port.

That is believed to include Hancock’s proposed 100% owned 20Mtpa Mulga Downs and 5Mtpa Murray’s Hill mines, and is understood to support the development of Mineral Resources’ (ASX:MIN) and Brockman Mining’s (ASX:BCK) 20Mt Brockman hub.

Hancock and MinRes announced a deal in November 2021 to share port and rail infrastructure in Port Hedland, operated by Roy Hill, to support the development plans.

But the preferred path for the new stretch of railway is to run close to the Solomon rail line owned by Fortescue Metals Group (ASX:FMG), where major shareholder and fellow WA billionaire Andrew Forrest returned as executive chairman last year.

That has been identified by Traditional Owners as the preferred route for the spur, according to documents lodged with WA’s environmental authorities.

An alternative path would see the amount of priority ecological community lost to the rail spur and hub nearly double from 191.81 hectares to 344.26ha.

According to the proposal, the hub and rail spur would operate for over 20 years, with a 2.5 year construction lead time once approved.


Discussions ongoing

According to Roy Hill’s EPA submission, it sought FMG’s consent to the rail investigation licence for the Mulga Downs spur in February last year but is yet to receive it.

Roy Hill says around 14.8 km of track of the 70km long spur will be located within a shared corridor parallel to the FMG Solomon Rail Spur, and that a “100m separation between the FMG Solomon Spur centreline and Mulga Downs Railway Spur centreline is sufficient for the purposes of this option.”

“RHI has confirmed to FMG that investigation activities will not impact FMG’s operations, nor future development plans,” it said in its submission.

A spokesperson for Hancock Prospecting said discussions with FMG were ongoing.

“The Mulga Hub and Rail Spur will support a unique opportunity in West Australia’s Pilbara by allowing third parties to access bulk ore handling and rail transportation, unlocking growth assets across the region which otherwise would have remained stranded,” he said.

“Two potential options for the location of the Mulga Rail Spur have been referred, the Mulga Hub will remain the same for either rail alignment.

“Roy Hill is in continuing discussion with Fortescue Metals Group regarding shared land access to allow progress on a preferred alignment identified by ongoing consultation with Traditional Owners.

“Roy Hill supports the wishes of the Traditional Owners in relation to their preferred shared land access route and is seeking the cooperation of FMG to enable the necessary shared land access.”

“Measures which seek to avoid, reduce, and manage the potential of emissions will apply to the design, construction, and operational phases of the Proposal, including energy efficiency initiatives and potentially the phased introduction of battery powered locomotives.

“Roy Hill was the first Pilbara iron ore producer to purchase an electric locomotive, with delivery scheduled this year for integration into current operations.”

FMG has been contacted for comment.


Rush to add tonnes

Australia is the largest iron ore exporter in the world, supplying around 60% of the seaborne market, almost all of it from WA’s Pilbara heartland where Hancock is the fourth largest producer behind Rio Tinto (ASX:RIO), BHP (ASX:BHP) and Forrest’s Fortescue thanks to its 70% stake in Roy Hill and 100% owned Atlas Iron operations.

But additions to Australia’s iron ore export volumes have been incremental in recent years, with new operations opened by companies like BHP and Rio largely about replacing tonnes from ageing and lower grade ore sources.

However, a new wave of iron ore developments has been proposed or placed under construction to revitalise or grow production across Australia’s major and mid-tier miners.

Fortescue Metals Group, which shipped a record 189Mt in FY22 and expects to deliver between 187-192Mt in FY23, will open its new 22Mtpa Iron Bridge magnetite mine this year.

The same is expected of the 35Mtpa MinRes-led Onslow iron ore hub, which founder and chief Chris Ellison has pledged will be the first from that operator to run at a similar cost-base to the majors.

Rio and BHP plan to continue ramping up their flagship Gudai-Darri and South Flank developments this year, but have also started moving on expansions.

Rio has approved the $2 billion development of its Western Range JV with Chinese steel giant Baowu and has signposted the construction Rhodes Ridge JV with Wright Prospecting as one of its long-term priorities.

BHP meanwhile plans to grow its production limit from ~290Mt to 300Mt and 330Mt in the longer term.

Hancock late last year moved Roy Hill chief Gerard Veldsman into a new role as CEO of group operations at Hancock with a view to growing production to 100Mtpa, with Atlas Iron chief Sanjiv Manchanda also taking up a role as chief executive of growth projects.

Its Atlas Iron subsidiary is planning to bring the McPhee Creek mine online in the middle of this year, to add to its Mount Webber, Sanjiv Ridge and Miralga Creek operations, which shipped 9.8Mt in FY22 and delivered a maiden dividend of $225m.

Roy Hill shipped a record 60.4Mtpa in FY22, according to Hancock’s annual report filing, paying out $3.3b to its owners.

A final investment decision on Hancock and MinRes’ Stanley Point 3 berth in Port Hedland is expected in early 2023.

Iron prices have swung wildly over the past 12 months as major customer and global steel powerhouse China has grappled with economic struggles from Covid and a depressed property sector.

But enthusiasm from traders about the end of Covid lockdowns has seen prices rise 50% to over US$120/t in recent weeks, with BHP boss Mike Henry today saying China would be a stabilising force in the global economy, predicting it would produce upwards of 1Bt of steel again in 2023.


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