UMC 0.00% $1.30 united minerals corporation nl

the pilbara infrastructure tpi 1st october

  1. 6,111 Posts.

    www.era.wa.gov.au/cproot/7020/2/20081015%20Public%20Submission%20-%20United%20Minerals%20Corporation%20NL.pdf

    Overpayment Rules
    &
    Costing Principles
    by
    UNITED MINERALS CORPORATION NL

    However, there are some fundamental factors with regard to the grade quality, and low cost
    of Pilbara producers in relation to global supply that suggest that price reductions will not
    result in mine closures, namely:
    • The Asian markets are of such volume and growing from low per capita levels of steel
    consumption that there is and will be a significant Asian base load requirement even
    during downturns,
    • The Chinese and Indian ores are low grade and the Pilbara ores are of the highest
    grade,
    • Australia is the closest supplier and has a freight rate advantage,
    • The Pilbara producers are in the lowest quartile of production cost of global producers
    and low cost producers generally survive the bottoms of commodity pricing cycles
    especially if they are in proximity to major consumers


    Page 1
    Page 2
    The Pilbara Infrastructure (TPI) Rail
    Part 5 Instruments submission
    for the proposed
    Overpayment Rules
    &
    Costing Principles
    by
    UNITED MINERALS CORPORATION NL
    Level 14, BGC Centre
    28 The Esplanade, Perth
    Western Australia 6000
    Postal address:
    GPO Box 2580 Perth
    Western Australia 6001
    Telephone: (08) 9481 0911
    Facsimile: (08) 9481 0922
    1 October 2008
    Page 3
    United Minerals Corporation - ERA Submission – Overpayment Rules & Costing Principles 2
    Table of Contents
    Executive Summary................................................................................................................. 3
    1. Introduction....................................................................................................................... 5
    2. Cost of Greenfield Railways ............................................................................................. 5
    3. Stranding Risk .................................................................................................................. 6
    4. Route Sections ................................................................................................................. 7
    5. Economic Life of Assets ................................................................................................... 8
    6. Major Periodic Maintenance and Depreciation................................................................. 9
    7. Other Issues ..................................................................................................................... 9
    Page 4
    United Minerals Corporation - ERA Submission – Overpayment Rules & Costing Principles 3
    Executive Summary
    United Minerals Corporation NL (United Minerals) is making this submission to the Economic
    Regulation Authority of Western Australia (Authority) regarding the Costing Principles and
    Over-payment Rules proposed by The Pilbara Infrastructure Pty Ltd (TPI) under the Rail
    Access Code 2000 regarding the terms of third party access to the TPI Railway in the
    Pilbara.
    United Minerals is supportive of the State, TPI and TPI’s parent, Fortescue Metals Group
    (FMG), to provide rail access to third parties and is prepared to meet its fair share of the cost
    in achieving such access if it were to seek access inside the Code. It is well recognised that
    TPI below rail facilities potentially offer the most cost effective method of delivering ore
    transport services to the eastern Pilbara. In accordance with other rail Access Regimes such
    access should be on fair terms to both parties similar to the Authorities Determination for
    WestNet Rail (WestNet) treating the rail as a stand-alone business.
    Cost of a Greenfields Railway
    TPI is proposing that the Authority accept their actual costs as the infrastructure is in effect a
    greenfield railway. However, United Minerals suggest that the below rail component was
    constructed in a manner to meet FMG financial and market contractual obligations. Such
    construction was not necessarily with modern equivalent assets (MEA) which would have
    had longer lead times reducing major periodic maintenance (MPM). Accordingly United
    Minerals requests that the Authority consider the Costing Principles, Over-payment Rules
    and the Weighted Average Cost of Capital (WACC) reflect the efficient costs of a stand-alone
    railway and these costs are estimated from a building block approach. United Minerals is of
    the view the railway has been constructed not as MEA nor represents efficient cost and is
    proposing that the Authority consider that the approach to MPM, unit rates, design, project
    management, and finance charges be similar to that of the WestNet Determination


 
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