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BHP, Fortescue tussle threatens Western Australia's Port Hedland housing buyback

The Western Australian government's deal to buy back houses in Port Hedland's West End affected by dust pollution from the iron ore port operations is under threat due to an ongoing tussle between BHP Group and Fortescue Metals Group Ltd., The Australian reported.

The state government is planning to buy back 540 properties in the area for an estimated total cost of between A$150 million and A$350 million, which will be funded by the industry.

BHP has proposed pro rata funding based on port capacity held by the companies, which will see it paying about 55%, Fortescue about 33%, and Gina Rinehart's Roy Hill Holdings Pty Ltd. about 10%.

However, Fortescue is opposed to the model, claiming that it is only responsible for 5% to 10% of the dust pollution.

Fortescue CEO Elizabeth Gaines said the buyback process should consider "the direct contribution to dust levels, together with the proximity to the West End, the length of time operating in the port and the economic benefit derived over the period of operation for each respective industry participant."

The company, however, may be willing to pay a larger slice if BHP agrees to reveal details of the Harriet Point Agreement, a secret deal signed between BHP and the Western Australian government, which Fortescue believes grants BHP the final say in any developments at Port Hedland.

BHP and the state government maintain that the agreement allows BHP to comment on new developments, but it cannot block them.

Fortescue is looking to construct a sixth berth and a new ship loader at Port Hedland, which may increase its export capacity by 60 million tonnes of iron ore to between 240 Mt and 250 Mt, close to BHP's 290 Mt theoretical cap.