PERTH (miningweekly.com) – Junior BC Iron and its Nullagine joint venture (JV) partner Fortescue Metals have agreed to vary the terms of the rail and port services agreement over the JV project.

The parties have agreed to a new tariff mechanism that would vary the amount paid by the JV to Fortescue subsidiary The Pilbara Infrastructure according to iron-ore prices for three months starting in November.

Under the new agreement, the rail and port tariff, which BC Iron MD Morgan Ball said represented a significant component of the JV’s C1 cash costs, would reduce when iron-ore prices are lower and increase when prices were higher.

The rail and port tariff would vary by around $0.50/t of ore shipped for every $1/t change in the iron-ore price below $56/t. The new tariff would be subject to a floor and cap price of $40/t and $70/t respectively, with the tariff remaining at the level prevailing at the floor or cap price level outside of this range.

The agreement could be extended on mutual agreement.

“This is a positive outcome for BC Iron and reflects a cooperative approach between Fortescue and BC Iron, given the current market environment. The variation to rail and port charges will have the effect of lowering the iron-ore price at which BC Iron can continue to generate positive cash flows from the Nullagine JV,” Ball said.

He added that, although the tariff did increase when iron-ore prices were higher, BC Iron would still retain some exposure to this upside.

Fortescue CEO Nev Power has, meanwhile, said the company welcomed the opportunity to trial the new tariff mechanism, which it believed served both parties.

“The announcement is a further example of Fortescue’s willingness to provide access to its world-class infrastructure on commercial terms, strengthening our collaborative approach to working with our partners in the Pilbara region.”

The Nullagine JV is 75% held by BC Iron, with Fortescue owning the balance. The project shipped 5.26-million tonnes of ore during the 2015 financial year.