MENU

BHP’s secret Port Hedland deal

It is believed that a secret agreement was made between BHP Billiton (ASX: BHP) and the Port Hedland Port Authority in the mid-2000s that would allow the mining giant to influence which companies could use the port for exporting commodities.

The Australian Financial Review reported that the deal, which is known as the Harriet Point Agreement, could play a major role in the future regarding which companies are allocated port capacity, based on whether or not their presence at the port would damage BHP’s efforts to increase its iron ore production.

BHP currently has plans to ramp up production of the steelmaking ingredient to 240 million tonnes per year (with an aim of 212 million tonnes this year). Whilst it is understood that the miner has no right to veto any attempted access to the port, it has the ability to influence and urge the port authority to reject access if it believes it could affect its expansion plans.

According to the report, the Western Australian government is exploring ways to open up access to the infrastructure, which would allow for greater production from second-tier iron ore miners. Meanwhile, Fortescue Metals Group (ASX: FMG), which also utilises the port, stated that it believes Port Hedland’s capacity of 495 million tonnes “substantially underestimates” its actual potential export capacity.

The AFR also revealed last week that both Atlas Iron (ASX: AGO) and Brockman Mining (ASX: BCK) were at risk of losing their allocation at Port Hedland unless they can meet their infrastructure development goals. Both are seeking a rail provider, such as Aurizon (ASX: AZJ) to enable them to do so.

Port Hedland, which is Australia’s busiest port and accounts for 20% of global iron ore exports, achieved record exports in September of 28.96 million tonnes for the month.

Foolish takeaway

With the price of iron ore remaining much stronger than most analysts had forecast, shares in the commodity’s miners have also increased significantly. However, there are still strong headwinds facing the sector that could drag shares down at any given time. Before investing in the industry, investors should ask themselves whether the risks are worth the potential benefits that could be realised.

Our favourite dividend stock -- FREE!

If you are looking for some stock ideas to add to your portfolio today, look no further than our #1 dividend-paying stock. Discover The Motley Fool's favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of "The Motley Fool's Top Dividend Stock for 2013-2014."

Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.