a bar too high, page-44

IMO paragraph #10 could affect ARH.

http://ramumine.wordpress.com/2011/06/04/the-australian-highlights-mccs-questionable-performance-in-aus/

June 4, 2011 ? 1:57 pm

?The Australian? highlights MCC?s questionable performance in Aus

The article below, from yesterdays edition of The Australian newspaper, highlights the questionable performance of the Chinese State owned company, MCC in Australia. MCC is the major partner in the controversial Ramu nickel mine in Papua New Guinea which plans to dump millions of tons of contaminated waste into the sea, 150m off-shore from the coast of Madang.
Palmer trusts MCC with $10bn construction

CLIVE Palmer?s Resourcehouse has contracted MCC ? the Chinese construction firm at the centre of rival miner Citic Pacific?s $1 billion cost blowout and year-long start-up delay ? to build coal and iron ore mines worth more than $10bn.

Citic Pacific?s dismal experience at its Sino Iron project, where it was forced to pay China Metallurgical Corporation an extra $US835 million ($784m), calls into question the costs and production timelines outlined in the Resourcehouse prospectus.

MCC has been handed a $US8.1bn contract for Resourcehouse?s Queensland China First Coal project and has teamed up with three Chinese construction groups that have never operated in Australia.

Mr Palmer?s group has also put MCC chairman Shen Heting on its board and promised to repay 75 per cent of the Chinese company?s planned $US200m investment in the Australian group.

The soon-to-be-listed mining group could also face extra costs for its $US2.7bn Western Australia iron ore project, as it must negotiate with an unhappy Citic Pacific to obtain rail access, power and water.

Mr Palmer sold Citic Pacific rights to low-yield magnetite iron ore deposits in Western Australia in 2006 and 2007 for a total of $415m plus hefty royalties for every tonne mined.

Now known as Sino Iron, the project is located adjacent to Resourcehouse?s planned iron ore project.

Citic Pacific has struggled to build its iron ore mine and processing plant using MCC as its main engineering, procurement and construction contractor, and costs have blown out by more than $1bn. As well, there have been labour disputes and a production delay of more than a year.

The Citic Pacific iron ore project was ?less attractive? with an 11 per cent internal rate of return, ?barely above the weighted average cost of capital of 10 per cent?, Morgan Stanley analyst Corey Chan said in research note.

Citic Pacific is likely to miss its revised start-up timetable ? and its critical revenue stream ? and is deeply aggrieved over the price of the deal with Mr Palmer and the quality of assets it was sold.

?We intend to utilise and/or expand upon some of the infrastructure facilities that are being developed by Sino Iron (owned by Citic Pacific), in particular the port facilities and transportation and power infrastructure, in order to minimise duplication of infrastructure for the China First Iron Ore Project and reduce our overall costs of development,? the Resourcehouse float documents say.

The plan was subject to approval by Mineralogy (another of Mr Palmer?s companies) and agreement with Citic Pacific, ?neither of which we have obtained?, it says. Failure to ?develop or obtain adequate and suitable infrastructure? would affect the projects? success ?and therefore materially and adversely affect our business?. Citic Pacific declined to comment.

MCC, with its subcontractor China Railways Engineering, will step in as cornerstone investors for Resourcehouse, tipping in $US200m each, but their investments are only subject to lock-up periods of six and 12 months, respectively.

MCC will get an upfront payment of $US150m once the project begins, 75 per cent of its investment in Resourcehouse, according to the prospectus. That is part of $US700m the Chinese company will pocket if production begins on time.

?The way that Chinese and Australian construction companies approach these projects is night and day,? a person familiar with the Citic project said. ?The Chinese answer is to throw labour at everything but you can?t afford to do that in Australia.?