Iron ore billionaire Andrew Forrest appears to have opened another front on his restless ambitions with reports that he has formed a joint venture with the leading member of Dubai’s ruling family aimed at resuscitating a railway line that links Guinea with neighbouring Liberia’s main port.
The Liberia port of Buchanan has long been assessed by prospective Guinean iron ore pioneers such as Rio Tinto, BHP and, most recently, a new private entity run by former Xtrata boss Sir Mick Davis, as the most cost-efficient export gateway for iron ore mined in Guinea.
But the existing rail pathway has long fallen into disrepair as a result of under-investment triggered by generations of civil war and political conflict.
Few other than Forrest understand the importance of railways to new iron ore provinces and over the weekend he was a signatory witness to a memorandum of understanding with the Liberian government that was formally signed by Sheikh Ahmen Dalmook Juma Al Maktoum.
The Sheikh is the very entrepreneurial vice-president and prime minister of the United Arab Emirates who has driven the growth of Emirates Airlines and global port operator DP World but is probably better known in Australia for his ownership of the Godolphin stables.
According to a statement released by the office of Liberian president George Weah (yep, the soccer legend), the Sheikh signed the MOU on behalf of an entity called Fortescue Maktoum, which was described as “a joint corporation of Fortescue Metals Group and Al Maktoum Company”.
A statement released by Weah’s office noted that Forrest has “expressed delight and joy for the smooth kick-off of investment discussions between his party and the Government of Liberia. The President’s office also posted 15 minutes of live coverage of Forrest’s arrival by Monrovia’s television network.
“I am here to grow your economy,” Forrest is said to have told local media after the signing ceremony. “I am here to grow your social services and to grow the standard of living of the Liberian people.”
Obviously, that is all very laudable, of course. But Forrest’s comments invite a question. How does the Australian mining magnate imagine he might achieve those ends?
Freeing our own imagination for a moment, it is hard to see how Forrest has arrived in Liberia in partnership with Al Maktoum with eyes only for a rebuild of a railway set. And the timing of his unexpected arrival in the Liberian capital of Monrovia could well be telling the extent of his now famously productive imagination.
You see Forrest has bobbed up in Liberia at the same time as the symbiotic worlds of iron ore mining and steel making are trying to work out whether or not they have entered a period of unexpected disruption.
The homeland of that uncertainty is Brazil and its face is the world’s biggest single iron ore exporter, Vale. Over just three years Vale has inflicted two tailings dams tragedies on the host communities of its southern iron ore production system.
The second and far more deadly of those disasters, the collapse of the Brumadinho dam in January this year, triggered a new round of executive bloodletting and saw the southern system shut for business until just recently.
The closures left an already tight seaborne iron ore market short of about 80 million tonnes on an annualised basis, a situation that continues.
The question for everyone from Chinese steel mills to iron ore entrepreneurs is whether or not Vale’s problems will be passing or whether the disaster and its mitigation will father structural supply shortage.
Through the past two decades or so it has become conventional wisdom that the next most likely new iron ore province sits in the southern reaches of Guinea near the border of Liberia.
The Nzerekore region of Guinea hosts a series of very large, very high grade iron ore deposits including the ill-starred Simandou prospect that tantalised Rio Tinto for the better part of 15 years and the Nimba project that is presently owned by BHP but has been coveted by others including billionaire copper whisperer Robert Friedland.
Simandou and Nimba are large deposits of 67-68 per cent iron ore. To put that grade into context, Rio’s benchmark product is 62 per cent while Vale’s top grade benchmark is a 65 per cent product.
As was revealed in April this year, there is international interest in the smaller rich pockets of iron ore on the contiguous mountain ranges that host Simandou and Nimba. On Good Friday a new investing entity formed by Sir Mick Davis, Niron Metals, signed a rail access MOU with President Weah’s government.
As it turned out, Davis and wealthy Israeli opportunist Beny Steinmetz were recently established joint venture partners in an iron ore project called Zogota, which sits not far from the still-BHP owned Nimba project.
Infamously, Steinmetz once had grander Guinean aspirations. To Rio’s frustration, the Israeli convinced a Guinean government past that he was a more appropriate owner of two of the four concessions that once made up Rio’s 170 million tonnes a year Simandou dreaming.
Subsequent events saw Steinmetz lose those two concessions after a new government found procedural fault with their delivery to new hands. And, as far as I can tell, those concessions remain in government hands.
So, if I were a successful, wealthy iron ore legend with a history of making unlikely things happen and with an already active interest in up-grading my Australian iron ore output, maybe I’d be interested in having a chat to the Government of Guinea?
For the record, we asked Forrest and Fortescue for a chat about what the Liberia option might be and we were directed to a statement offered to Liberian media on Monday.
“As a mining company Fortescue has world-class exploration and infrastructure expertise and will build on our operational reputation to harness the skills and capabilities of out team members to drive future growth through product diversification and asset development,” that statement said.
“A delegation led by Fortescue Founder and Chairman, Andrew Forrest AO, recently visited Liberia to meet with the President and other officials to discuss potential economic and development opportunities. There were introductory meetings and, at this stage, no Memorandum of Understandings or other agreements between Fortescue and the Liberian Government have been signed.”
Needless to say, that is not what President Weah’s office claimed. Rather, the claim is a joint venture that includes Fortescue has signed an MOU and rail rehab is the plan.
BHP chief executive Andrew Mackenzie must surely be starting to wish he could somehow bottle whatever the animal spirits are that makes BHP such a productive beast between April and June.
Over consecutive financial years BHP has managed to pull the production rabbit out of the hat through the June quarter, enabling recovery to something near forecast neutrality from the disappointments of previous quarters.
Mackenzie needed a strong final quarter and the business delivered with petroleum over-reaching FY19 guidance, iron ore and copper hitting admittedly lowered guidance and metcoal surging home with a sail still wet from the Bowen Basin wet season to almost hit targets.
BHP has guided the market to solid incremental growth in iron ore, copper and metcoal production in 2020. And, of those forecasts, it is the iron ore forecast that most interests me.
BHP says its Pilbara production will range between 273 million tonnes and 286mt. It has also flagged the export flows will be interrupted through September by a “major car dumper maintenance campaign”.
So let’s think about that for a moment. BHP’s Pilbara system has a long-term annual production target of 290mtpa and the company has flagged that it will get within 4mt of that in 2020 even with the planned out at Port Hedland.
It you ask me, that implies that BHP can already reach beyond its long-standing 290mtpa target using a system whose nameplate was left at only 240mtpa after the last major round of capex. And that, surely, means BHP’s iron system is living the Mackenzie dream of growth through productivity rather than capital investment.
*Matthew Stevens writes on business, specialising in mining, energy and opinion. Matthew is a senior business writer and columnist. Email Matthew at email@example.com