Reuters reported that a new deepwater port on Australia's Indian Ocean Coast was supposed to be the showpiece of the country's decade long mining boom and open up a huge new iron ore belt to export to Asian markets.
But twice in the past 15 years, plans for the port on a scrubby stretch of land 400 kilometer north of Perth have collapsed, most recently last month, when Japan's Mitsubishi Corp put the USD 6 billion project on ice due to spiraling costs and falling iron ore prices.
The move will keep a new chunk of iron ore from the Mid West region of Western Australia off world markets and further cement the stranglehold of Rio Tinto and BHP Billiton, the world's No 2 and No 3 producers, who dominate the iron rich Pilbara region further north.
The port of Oakajee near the town of Geraldton was meant to be the point where a spaghetti junction of rail lines serving dozens of new mines converged, dumping millions of tonnes of iron ore into waiting freighters bound for Asian steel mills.
Without it, more than 13 billion tonnes of iron ore resources, nearly one fifth of Australian reserves, will remain on the drawing board, including Mitsubishi's Jack Hills expansion, Sinosteel Midwest's Weld Range and Asia Iron's Extension Hill.
Hit by weaker iron ore prices, projects like Oakajee and the mines to back it up have become too expensive in Australia where there are some USD 270 billion of resource projects underway, all competing for workers, equipment and materials.
Mr Darko Kuzmanovic a resources fund manager at Caledonia Investments said that "The cost structure of these projects has gone through the roof. Just on economics, a lot of these have become too hard to justify."
As projects languish, Rio, BHP and Australia's third biggest iron ore miner, Fortescue Metals Group, are ramping up output at their mines which have the margins to stay profitable even with prices down a third from last year's peak.
Iron ore is Australia's single largest export, worth USD 62 billion last year. The vast majority is shipped to Asia through a handful of ports in the Pilbara served by a few rail lines.
The big advantage for Rio and BHP, besides the high quality of their ore, is they have their own rail lines, which they fully control and don't want to share.
Fortescue is the only other firm to have its own iron ore rail line in Australia, after founder Andrew Twiggy Forrest snapped up iron ore assets a decade ago, lined up Chinese customers who were trying to break the grip of Rio, BHP and top producer Vale and found lenders to back his USD 15 billion bet on Chinese demand for steel.
It may be too late for aspiring producers aiming to become the next Fortescue, given Chinese steel growth has slowed, iron ore prices have tumbled and the global outlook remains rocky.
Mr John Langoulant CEO of Oakajee Port and Rail said that "It's no secret that the current economic environment is creating challenges in the mining sector with many WA companies and producers scrutinizing their capital management."
Meanwhile, Fortescue may control the future of several fledgling miners, including Atlas Iron, Brockman Mining and Flinders Mines. It said this week it was in talks that could lead to a spin off of its port and rail assets into a separate business, which could allow access to its rail line for some smaller miners.
