Atlas Iron Is Open to Talks With Fortescue on Pilbara Rail Line

Atlas Iron Ltd. (AGO), Australia’s fastest- growing iron ore producer, is open to talks with Fortescue (FMG) Metals Group Ltd. to build a railroad in the Pilbara region that will allow exports to meet demand in Asia.

Atlas welcomes a third partner as long as Atlas has room to haul its own iron ore, David Flanagan, executive chairman of the Perth-based company, said today after a conference in Melbourne. Fortescue, Australia’s third-biggest iron ore exporter, said May 3 it’s open to talks with the smaller rival to co-operate on the development.

Iron ore producers including Fortescue and Atlas are boosting output and expanding ports and railway networks to meet growing demand in China, the biggest consumer of the steelmaking raw material. Fortescue, doubling its main line to Port Hedland as part of an $8.4 billion expansion to almost triple output, may benefit from swapping rail and port capacity with Atlas, Macquarie Group Ltd. said in an April 27 report.

Macquarie estimates the Atlas railway project may cost $1.5 billion. Atlas, which is seeking to boost annual shipments to 46 million metric tons by 2017 from 6 million tons, tied up with QR National Ltd. (QRN) to study building the line to Port Hedland, the gateway to Asia from the ore-rich region in northwestern Australia.

Fortescue declined as much as 5.4 percent to A$4.57 and traded at A$4.68 as of 12:58 p.m. in Sydney, while Atlas fell 0.5 percent to A$2.12. The benchmark index fell 1 percent.

To contact the reporter on this story: Soraya Permatasari in Melbourne at soraya@bloomberg.net

To contact the editors responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net; Andrew Hobbs at ahobbs4@bloomberg.net

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