Fortescue Metals Group is briefing its legal team for the next round of its stoush with would-be iron ore exporter Brockman Mining, after the State's economic regulator slashed the maximum amount Fortescue's infrastructure arm can charge for access to its rail line by almost half.
The Economic Regulation Authority released its long-awaited determination on the floor and ceiling costs for access to The Pilbara Infrastructure's rail line yesterday. It rejected earlier cost claims by TPI and said the infrastructure company could set prices that allowed it to recover a minimum annual amount of $84.7 million and a maximum of $316.9 million from line users - including Fortescue. The ERA ceiling cost is 44.9 per cent below TPI's $575.6 million submission in May, but the regulator also upped the minimum cost by 15 per cent.
The determination released yesterday was heavily redacted at Fortescue's request and the basis of the calculations is unclear.
ERA chairman Lyndon Rowe told _WestBusiness _the floor and ceiling figures represent the "minimum and maximum recoverable revenue" from all operators and all other entities, including Fortescue, on the route.
Fortescue's preferred model is to negotiate full haulage deals with smaller players wanting to get access to its infrastructure, which would include service charges well above the ceiling rates allowable. It has opposed Brockman's bid to run its own trains.
The determination was designed to give a price framework to negotiations between the two warring camps. Fortescue said it was reviewing the ERA ruling with its lawyers.
It reiterated that it could not be forced to negotiate a deal with Brockman unless the would-be miner demonstrated it could fund and manage a mine and associated infrastructure.
Brockman managing director Russell Tipper yesterday welcomed the decision, saying the framework "further enhances Brockman's ability to demonstrate the financial viability of its project".
The two now have 90 days to negotiate a commercial outcome.
On Wednesday ERA chairman Lyndon Rowe said a deal would require "grown up" negotiations.Fortescue shares closed down 14Â¢ to $4.66, and Brockman shares were unchanged at 55Â¢.