Metals News
CITIC Pacific loads first Australian iron ore cargo
industry news
Mon, 2 Dec 06:00:00 GMT
* First cargo three years behind schedule
* One of six processing lines operating, 2nd starting up
* In mediation over royalties spat with tycoon Palmer
(Adds CITIC Pacific comments)
MELBOURNE, Dec 2 (Reuters) - China's CITIC Pacific <0267.HK> has begun loading the first ship with ore from its long delayed and massively over-budget $8 billion Sino Iron project in Western Australia, the state-owned company said on Monday.
The Sino Iron project, China's biggest investment in Australia, was expected to start shipping ore to Chinese steel mills in 2010 as part of Beijing's strategy to ease its dependence on iron ore giants Vale , Rio Tinto and BHP Billiton .
CITIC Pacific missed that target and project costs more than tripled, which it blamed on its own inexperience and that of its contractor Metallurgical Corp of China (MCC) <601618.SS> in building a project of this scale outside China.
The project is now slowly ramping up, having encountered problems in the start-up of the first of six concentrator lines. The first line is operating and a second is being commissioned.
The first two concentrator lines will together produce 8 million tonnes a year of iron ore concentrate, or one-third of the project's eventual target.
"Production cost per tonne will be high until the project is in full production, as interest can no longer be capitalised and depreciation begins," CITIC Pacific President Zhang Jijing said in a statement.
The project mines magnetite iron ore, which has a lower iron content than hematite ore and needs to be processed using huge magnets to produce export-grade ore equivalent to hematite.
Work has continued while CITIC Pacific has fought claims by Australian mining magnate Clive Palmer, who sold the rights to the iron ore to CITIC Pacific and says he is owed hundreds of millions of dollars in royalties.
The two sides are now in mediation.
CITIC Pacific shares have plunged more than 40 percent over the two years ended 2012.
(Reporting by Sonali Paul; Editing by Himani Sarkar)
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