Australia's Duet and Canada's TransAlta to build gas pipeline for Fortescue

SYDNEY Wed Jan 15, 2014 7:13pm EST

SYDNEY Jan 16 (Reuters) - Australia's Duet Group and Canada's TransAlta Corp announced a joint venture to build a 270 kilometre (168-mile) pipeline in Western Australia to deliver gas for Fortescue Metals Group Ltd's mining operations.

Fortescue, the world's no.4 iron ore miner, will use the new pipeline to convert the power station at its Solomon Hub from diesel to natural gas in a move to cut costs, the world no.4 iron ore miner said on Thursday.

The conversion from diesel to gas will save approximately $20 million a year, Fortescue said.

Fortescue has been pursuing a stringent cost-cutting drive, including paying off and repricing high-cost debt while iron ore prices remain strong.

The new pipeline will connect the existing Dampier to Bunbury natural gas pipeline to the 125 MW Solomon power station, which is operated by TransAlta.

Duet holds a 57 percent interest in the project, which will cost about A$178 million ($159 million), while TransAlta owns the rest.

They will share operation of the pipeline, due to begin construction in July and start working in early 2015.

Duet has launched a fully underwritten placement to raise A$100 million to fund the project.

Fortescue shares climbed 3.3 percent to A$5.51 at 2335 GMT, beating a 0.5 percent rise in the broader market. Duet is in a trading halt.

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