takeover i think , page-4

well yesterdays strong bounce could be because MMX said they can sell mine to fund OPR as well...if I scratch my head sino has project in jack hills and they are neighbours and if they buy mmx(they were interested in the past), that will have weld range and JH...This time they will have strong case against FIRB and saying that gov dont mind chinese investing in WA now, FIRB will approve with premier supports...dont know whats in their mind......but its a big game for sure!



http://www.businessspectator.com.au/bs.nsf/Article/Oakajee-project-viable-study-pd20110704-JEVTN?OpenDocument

Murchison Metals Ltd will even consider selling its flagship iron ore mine to pay for the over-budget and late Oakajee port and rail development.

The company has also shaken up it senior management, with the executive chairman stepping down, the chief executive becoming chief operating officer and a new chief executive officer being brought in.

The future of Oakajee came under a cloud last month when state-owned Chinese group and would-be Oakajee customer Sinosteel mothballed its $2 billion Weld Range iron ore project.

Meanwhile, Murchison is struggling to secure loans for the project and says it will play a smaller role.

Incoming chief executive officer Greg Martin told a teleconference that the miner would consider all options to fund the Oakajee project, north of Geraldton in Western Australia.

That included selling its $3.7 billion Jack Hills iron ore project.

"There is no doubt that Murchison finds itself in a very challenging environment," said Mr Martin, a former AGL Energy Ltd chief.

"All options are on the table for consideration as part of this process ... nothing is sacred or sacrosanct."

Murchison shares plunged by 20 per cent on Monday on news of the cost blowout and after emerging from a trading halt entered into on June 23 but recovered dramatically to close down 1.5 cent, or 1.96 per cent, at 75 cents.

Independent analyst Peter Strachan said Murchison would most likely reduce its 50 per cent interest in Oakajee Port and Rail (OPR), its joint venture company with Japan's Mitsubishi.

"The company has already moved down the path of selling some or all of its interest in OPR," Mr Strachan told AAP.

Mr Strachan said Murchison was a small company and couldn't finance half of a $6 billion project on its own.

According to a feasibility study released by Murchison on Monday, the proposed port and associated rail will cost $5.94 billion in total to develop.

This compares to an estimate of $5.24 billion in November and an original costing of $3 billion in March 2009.

Despite the cost blowout, Mr Martin says Oakajee's costs compare favourably with other infrastructure projects and he was confident it would attract investors.

WA Premier Colin Barnett says he expects Chinese parties will be interested in a stake in Oakajee.

Mr Martin said Chinese entities had already invested $3 billion to $4 billion in the region, and it was logical for the Oakajee development to proceed.

Murchison has not completed its debt financing arrangements and says it has been reviewing its options.

Mr Martin said he would spend the next fortnight on the road asking for funding from the WA government, Mitsubishi and other possible investors.

He will also try to repair relations with Sinosteel - which said the delays were costing it $100 million a year - and other foundation customers.

The WA and federal governments have already committed a combined $678 million to the port.

But Mr Barnett has consistently ruled out the state government increasing its $339 million contribution.

Mr Barnett has described Oakajee, one of Australia's largest infrastructure projects, as the state's most important development for the next 50 years as it would open up a second major iron ore province, behind the Pilbara.

As part of Murchison's shakeup, executive chairman Paul Kopejtka stepped down and former chief executive officer Trevor Matthews became chief operating officer.

Cost overruns

Australia has faced cost overruns on a number of resource projects recently, but with strong demand from Asia set to continue, some analysts see the need for more ports to handle exports still in place.

"There is no shortage of demand for new port and infrastructure of this type in Australia," head of wealth management at Bell Potter Securities in Perth Heather Zampatti said.

"And Murchison is certainly no orphan when it comes to cost overruns and delays to projects."

Escalating costs have already started to hit $200 billion worth of energy and mining projects underway in WA, where global miner BHP Billiton Ltd and Woodside Petroleum Ltd recently announced cost blowouts.

Sinosteel's withdrawal leaves Gindalbie Metals Ltd's Karara iron project and the Jack Hills mine owned by Murchison and Mitsubishi as the two remaining customers for Oakajee.

Gindalbie has said it was not relying on Oakajee to produce up to 16 million tonnes of iron ore per year, though expansions beyond that will require the construction of Oakajee.

Gindalbie faces its own financial strains. Last week it said it will consider an equity raising with the help China's Angang Steel Co to fund a 30 per cent leap in construction costs.

The mid-west region of WA is viewed as fresh hunting ground for foreign prospectors, many from Asia, hungry to tap Australia's abundant cache of minerals but virtually barred from the Pilbara by Rio Tinto Ltd and BHP Billiton Ltd, the world's second and third largest producers of iron ore.

Shake-up long overdue: Barnett

A dramatic shake-up at the top of Murchison is long overdue, West Australian Premier Colin Barnett has said.

The WA and federal governments are funding a combined $678 million into the port section of the project. In March 2009, Oakajee's proponents expected the project to cost about $3 billion.

Mr Barnett said the changes at the top at Murchison may help the planned development, Australia's largest infrastructure project, get back on track.

"Oakajee is going through a period of internal reorganisation, perhaps that was long overdue and I hope some good will come out of this," he said.

The WA Premier said he was confident the Oakajee project would go ahead but construction of the 550km railway line may be developed in stages.

"You already have major mines under construction to build the railway, the port will be basically commonwealth and state funded," he said.

"However, clearly there needs to be changes to either the design or the level of investment in the rail and port."

Murchison and Mitsubishi have until December 31 to finalise key implementation agreements and secure supply chain agreements with foundation customers.

Murchison and Mitsubishi will retain exclusivity over the project until then.

"If they are unable to deliver the project in terms of financial commitment by the end of the year, then the project in a sense reverts to the government to decide what will happen," Mr Barnett said.

According to the feasibility study, first shipments through the Oakajee port, north of Geraldton in WA's mid west, will occur in 2015 instead of 2012 as originally scheduled.