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Arrium the latest Australian miner to be stung by take-or-pay rail contracts

By Admin | Features

Feb 15

Arrium Ltd will continue to pay for rail access long after it shuts a group of loss-making mines in South Australia, in the latest example of Australian miners being stung by “take-or-pay” rail contracts.

Arrium recently confirmed it would close its Southern Iron mines near Coober Pedy in the first half of 2015, on the back of steep declines in iron ore prices that have rendered the assets unviable.

Located 600 kilometres from Whyalla port, rail access was a crucial part of the operation and the previous owner of the mine, WPG Resources, arranged the rail contracts with United States company Genesee & Wyoming at the height of the iron ore boom in 2011.

Arrium adjusted the haulage volumes when it inherited the rail contracts in mid-2012 but it did not adjust the length of the contracts, which are believed to run until mid-2017.

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