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Rail and freight giant Aurizon is continuing to assess the worth of building a new rail line in the Pilbara as it seeks more exposure to Australia's iron ore mines.
A new stand-alone, open-access railway in the Pilbara would cost about $10 billion to construct and on current projections would need the support of at least a few miners.
Aurizon, formally known as QR National before it was privatised in 2010, has ruled out attempting to buy into Fortescue's existing Pilbara rail line, saying the company has no interest in being a passive minority investor in somebody else's line.
However, it has been in talks with several smaller miners including Atlas Iron and Brockman Mining over the possible new Pilbara railway.
Aurizon's chief Lance Hockridge has told the ABC's Insider Business program the company was now concentrating on what it called the East Pilbara industrial railway.
He says Aurizon is continuing its examination, despite concerns that falling iron ore prices would make it impossible to guarantee returns on the multi-billion-dollar investment needed.
"This is a 30 to 40-year business, we're very much in the early stages of our investigation," Mr Hockridge said.
"We would look to the viability of building a dedicated greenfield line, dedicated in the sense of being dedicated to all of those miners who presently don't have access to the majors, to the dedicated lines.
"In other words, the concept is essentially around the heart of being open-access. It would be open to all comers as opposed to being dedicated to individual miners."
However, he said it would be preferable to also have Fortescue's iron ore on its potential new railway line.
"The point of the matter is though it takes two to tango and that's not what Fortescue or others are talking about at the moment," he said.
"I emphasise again it's at concept phase and we need to do a good deal more work and we're encouraged with the progress so far, but there are self-evidently a whole range and raft of issues that we're got to get through before we get to anything which is more definitive."
Aurizon has been talking to Perth-based Atlas Iron, Brockman Mining as well as other smaller miners.
"We're talking to a wide range of people," he said.
Ongoing demand for iron ore to decide rail line's futureMr Hockridge acknowledged the likelihood of such a line will depend on the future demand for iron ore.
"We do a lot of independent analysis," he said.
"We have the opportunity to talk to a lot of the end customers, we have the opportunity to be able to gather the sort of information from third-party sources. At the end of the day we continue to be optimistic.
"It's clearly not the kind of growth rates that we might be experiencing or indeed expecting a year or two ago, but nonetheless, looking at the continued GDP growth in China for example, looking at the cross-over with that and the steel intensity in China, our view is that fundamentally this is and will remain a good business for a long time.
"The amount of growth will continue to be there for a long time yet to come."
He said technology would play an important role.
"For example in the operations space ... the ability to be able to run longer trains, more efficient trains, have more disciplined cycle times in our operations," Mr Hockridge said.
"Fundamentally having the best technology in the business is going to underpin that and we gave some examples of where we're number one or number two in the world in the use and application of some pretty interesting technology which is going to be able to underpin in my view that kind of capability.
Rail haulage would prove 'far cheaper' transport optionOne of the miners in talks with Aurizon, Atlas Iron, acknowledges the new rail proposal could be a "fantastic solution".
A mine-to-port rail link is widely considered to be vital for Atlas Iron's future success. Atlas managing director Ken Brinsden told Inside Business that rail transport was an opportunity being investigated.
Atlas is currently paying about $13 per tonne to haul its iron ore to Port Hedland by truck. He says rail would likely be far cheaper."No-one's been able to establish a benchmark for Pilbara rail haulage, but when we look at what else happens around Australia, maybe the east coast coal networks or even the little bit of iron ore that makes it to the railway in the Northern Territory, I guess they're paying in the order of five to six cents a tonne per kilometre," Mr Brinsden said.
"Clearly there's an opportunity to be on the rail, and rest assured we're looking for solutions like that so we can come up with a logical and commercial and more sophisticated infrastructure solution that makes sense for the business.
"It's fair to say we've got a discussion going on with quite a few people and at the end of the day the Aurizon solution might very well constitute a fantastic solution for the Pilbara as a whole.
"When you've got an infrastructure provider looking to provide a service that is not a participant in downstream markets, then that in itself might make for a very good service.
"I guess the challenge, if you like, in the development of a network like that proposed by Aurizon, its first hurdle for development is a high one ... it's an expensive exercise building this sort of infrastructure in the Pilbara."
However, Mr Brinsden says the Aurizon proposal would need more than two customers.
"We've made no secret that Atlas is not really in a position to justify rail in its own right," he said.
"If a network like Aurizon is going to be able to get up in the Pilbara, then there's no doubt in my mind it needs multiple customers."
This article first appeared on www.abc.net.au
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