another article to read Oakajee project potentially an El Dorado Amanda Saunders April 26, 2014
Padbury Mining's $4.6b financier raises questions Is the stricken $6 billion Oakajee port and rail project in Western Australia the ''El Dorado'' of Australian infrastructure projects? The dream of unlocking the potential of WA's iron ore-rich mid-west and opening it up to export markets hinges on Oakajee. The rail and port, if constructed, would allow billions of tonnes of mid-west ore to be extracted and shipped, creating WA's next great export hub, after the Pilbara. But the owner of the Oakajee project, Japanese industrial giant Mitsubishi Corporation, has been stymied by a lack of co-operation from mostly Chinese-owned or backed mining companies in the mid-west. Frustrated by the slow progress, WA's Barnett government stripped Mitsubishi of its exclusive development rights for the project in 2011. Then, in 2012, Mitsubishi decided to cut its losses, putting the project on ice and sacking most of the project's staff. And that appeared to be it - until earlier this month, when Perth iron ore minnow Padbury Mining said it had secured the $US6.5 billion needed to finance the project. The money is said to be coming from little-known ''private equity'' firm Alliance Super Holdings, backed by colourful Sydney entrepreneur Roland Bleyer. Padbury is in a two-week trading halt after repeatedly promising to disclose the terms of the deal. Needless to say, much doubt has been cast over whether Padbury will succeed where Mitsubishi failed. Mitsubishi and former joint-venture partner Murchison Metals won the right to develop Oakajee port and rail in a 2008 state government tender, beating the Chinese consortium Yilgarn Infrastructure. Padbury bought Yilgarn's intellectual property for $2.25 million in 2011, saying it was formulating a plan to rival Mitsubishi, with other mid-west miners. To be viable, industry insiders say, Oakajee needs to handle between 45 million and 50 million tonnes a year. Mitsubishi's own Jack Hills mining operations in the region could produce at least 20 million tonnes of magnetite ore a year, but without participation from one of the region's other miners or explorers - which include Sinosteel Midwest Corporation, Chinese-backed Gindalbie Metals, Cashmere Iron, Ferrowest, Golden West Resources and Padbury - the project is unlikely to stack up. Also, the magnetite ore mined in the mid-west is more expensive to produce than the haematite ore that dominates the Pilbara, which adds to operating and development costs. ''It's a combination of very large capital costs and Mitsubishi's inability to get a disparate group of emerging miners to commit to 'use and pay' charges, to ship minimum tonnes and pay minimum rates to support building Oakajee,'' one observer said. WA premier Colin Barnett has distanced himself from the Padbury deal, saying there is ''very little prospect'' of it succeeding. He remains convinced Oakajee can attract Chinese investment and says the CITIC Group, a Chinese state-owned enterprise, is in the frame as the latest potential backer. But another industry player with knowledge of the project said that ''the question has always been whether or not the Chinese and Japanese would work in a joint venture together''.
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