Charlotte Dudley: What have been some of the highlights and lowlights of 2008?

 

Russell Tipper: Well if you put the global financial crisis aside as an obvious lowlight, and I think the only real downside it had for us was the cancellation of our demerger in that [the financial turmoil] just changed the world such that that was no longer a prudent thing to do. And a lot of the reason for doing it had fallen away.

 

Otherwise everything else was positive. Isaac Plains hit the million tonne per annum mark in terms of product coal … at Eagle Downs we upgraded our resource statement to some 780 million tonnes [and] completed a pre-feasibility study on that project.

 

We upgraded the resource statement on the Belvedere coking coal project quite significantly to 3.8 billion tonnes, and commenced pre-feas on that.

 

We had two other 100 per cent projects, Washpool and Red Hill, where we were able to establish resource statements of 138 million and 75 million tonnes respectively.

 

On the iron ore side of things we updated our resource statement to just under 500 million tonnes, and a pre-feas was delivered by the project team, indicating a very low cost operation, albeit at a significant capital spend to construct rail and port facilities in the Pilbara.

 

CD: Aquila recently recommended Anketell Point as the preferred port for the West Pilbara iron ore project. What are the benefits of this site and is there still potential for third-party access to Pilbara infrastructure?

 

RT: The recommendation to adopt Anketell as our preferred port was a change from the pre-feasibility study and that was as a result of further geotechnical study by doing some seismic work on the channel and jetty alignments at the various ports we were looking at.

 

On a straight NPV basis Anketell stands out over the others but I think there’s a pretty good probability of being able to share the development of that port.

 

Fortescue Metals Group have publicly announced that they’re considering a port development in that same area and this gives an opportunity to do that jointly which would obviously save money for both of us.

 

We would need to have a formal process of how we might work going forwards if we’re going to jointly develop. We haven’t got to that stage yet.

 

All of the tenements in the West Pilbara that lie to the south of and west of our tenements who, without infrastructure development of a rail and port, may not otherwise be able to get going. So I think there’s a significant potential to open up a lot of production capacity in that West Pilbara area.

 

CD: Red Hill Iron wasn’t too happy about the Anketell recommendation. Has that altered your relationship with the company?

 

RT: We’re in a joint venture with them on a good part of the tonnage of that resource and we’re proceeding with the DFS.

 

Albeit they’ve stated their reservations about how we’re going about doing it. They’ve asked questions of us and we’ve told them why we think what we’re doing is the way to go.

 

They’re obviously reserving their right and have on a couple of occasions mentioned litigation, which they haven’t at this stage embarked on.

 

Their comment on Robe River is somewhat obvious. It would be wonderful to get on the Robe River railway line and out through Cape Lambert, that’d be perfect but in my experience it’s not a likely solution at this time.

 

CD: What’s your outlook for the 2009 iron ore market?

 

RT: The problem at the moment in terms of the iron ore market is understanding what the real level of demand going forward is.

 

I think we’re seeing significant destocking going on, so there’s not a whole lot of transparency as to where this thing’s going to stabilise.

 

If we were in production it would leave us somewhat confused but given that we’ve got a development project … that’s not likely to be looking for funding until probably 2010, there’s no point getting too concerned about what the market’s like today.

 

We continue to get strong support from the mills that we visit, encouraging us to proceed with our program because they obviously see the need for further capacity to come on in due course.

 

CD: Where do you see iron ore pricing heading?

 

RT: The pricing is still very much in the hands of the big three and it’s very much how they play their particular cards.

 

The big three still control about 80% of seaborne trade so I expect them to take a fairly strong position and I have a sense that the longer the pricing process goes, the less damage you’ll see in terms of the new price set.

 

CD: How are operations progressing at your Isaac Plains JV with Vale, and where do you see coal demand and pricing headed?

 

RT: The coal demand, especially thermal coal demand, will follow hand in hand with iron ore.

 

Isaac Plains as a project is expanding its throughput capacity in line with the expansions at Dalrymple Bay. That’s always been the limiting factor to date on that project.

 

We are seeing some requests for deferral of shipments in the next quarter.

 

CD: And pricing?

 

RT: It’s anybody’s guess and it’s all complicated by the fact that people are destocking.

 

Until we see what exactly what is cut out of supply and then what the ongoing demand is going to be once the destocking process is complete, then you’ll have some understanding as to whether you’re significantly in surplus or in balance or significantly in deficit. And that’s going to guide the parties who are negotiating the prices as to where it should go.

CD: There’s been a lot of talk about possible asset sell-offs, mostly centred around Aquila’s joint venture coal projects. What does the future hold in terms of divestments or ownership restructure at Aquila?

 

RT: I think at this moment everyone’s sitting on the sidelines just waiting for clarity.

 

We’ve always said that we’re happy to talk to anyone any time but we’re of the view that at this point in time it would be very difficult to reach any sort of agreement to deal in assets with the uncertainty that’s in the market at the moment.

 

We talk with [our joint venture partners] all the time but in terms of an asset transaction that’s not on the table at the moment. Could it be in the future? Quite possibly.

 

We’ll be very much hoping to see in 2009 much more clarity in where the market’s heading because I think this global financial crisis has created such turmoil … that you really just can’t see any clarity as to what’s the likely equilibrium coming out of this.