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Fortescue Metals Group, which blasted its rivals for boosting production when iron ore prices were low, has been studying the feasibility of expanding its rail network to transport 180 million tonnes a year.
The expansion is being considered as part of plans to sell a stake in its WA iron ore mines.
Fortescue’s debt-reduction strategy includes options to sell a 15 per cent to 20 per cent stake in its Pilbara mining operations.
It is understood the rail study was launched this year after potential partners indicated Fortescue would be more attractive to Chinese buyers if it could show a clear path to an expanded production base.
The completion of its fifth Port Hedland berth in March means Fortescue has a 180mtpa port capacity. But its rail infrastructure is rated to sustainably haul up to only about 165mtpa. It can sprint above that rate for short periods.
Analysts have previously put the cost of upgrading Fortescue’s rail network at between $700 million and $800 million.
The study is believed to be examining the technical feasibility of a low-cost expansion to its rail capacity. Options include lifting the load-bearing ability of ore wagons by 5 per cent and running longer trains.
Fortescue will need to determine whether those options are viable while still meeting the line’s maintenance needs and without spending big on additional passing loops or double-tracking sections of the line.
Fortescue declined to comment. It has previously said it expects to ship between 160mt and 165mt this year.
It is believed Fortescue is unlikely to announce plans to expand its targets any time soon.
As Fortescue studies its options, Rio Tinto yesterday announced a pull-back in Pilbara exports due to bad weather.
Rio shipped 146.5mt in the first half of the year, according to yesterday’s quarterly production report, 8 per cent more than the same period last year. But it said poor weather cost it 7mt in shipments this year and cut its global iron ore production target by 10mt to 340mtpa.
Rio Tinto shares closed up 19¢ yesterday to $53.31. Fortescue was down 2.5¢ to $1.75.
This article first appeared on au.news.yahoo.com
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