Minemakers (ASX: MAK)  and Australian Transport and Energy Corridor Ltd (ATEC) have agreed to a financial study for a railway line for development of the Wonarah phosphate project near Tennant Creek - ranked as the biggest undeveloped phosphate project in the southern hemisphere.

Minemaker's managing director Andrew Drummond said should the outcome of the study be positive, ATEC would manage the approvals process, financing and construction of the rail link.

He said the rail concept was expected to lower materially the operating costs and could potentially allow higher production output than the blueprinted 3 million tonnes per annum for road haulage.

That blueprint had included road freight of the direct shipping ore and/or beneficiated rock phosphate from minesite to a transport hub at Tennant Creek. There it would be re-handled and loaded onto trains for standard gauge rail haulage to the northern export port of Darwin.

The road freight and rehandling component has been identified as the single greatest operating cost of the whole production, processing and freight chain - not uncommon for remote resource projects in Australia where the challenge is the tyranny of distance.

Drummond said practical limitations to road haulage over the approximately 270 km of the Barkly Highway are considered to set the production ceiling at 3 Mtpa.

Construction of a standard gauge rail spur line from near Tennant Creek to Wonarah would likely result in considerable cost savings by removing the road haulage and re-handling aspects and, subject to market demand, could allow considerable expansion of production.

ATEC is an unlisted rail infrastructure development and investment company. It was successful in securing an unsolicited public private partnership mandate from the Queensland Government to deliver the Surat Basin rail project.

Stage one of the study will be a desktop one and will be completed by the end of May and will include preliminary financial modelling.

While it has long been our stated objective for a rail link to Wonarah to be constructed as the key to a second stage development of the Wonarah deposits, the ATEC approach potentially enables a faster track to satisfy this objective, Drummond added.