Citic digs in as Sino Iron shows promise, finally
Citic Pacific Mining CEO Chen Zeng at the mine site near Karatha. Picture: Tony McDonough.
For years, Citic’s $12 billion Sino Iron project in Western Australia’s Pilbara region has been derided as a white elephant, a costly foray by a naive Chinese company into a mine that has produced more lawsuits than iron ore.
Now, however, with the massive project finally starting to hit its straps, Citic is looking to put that past behind it and prove that Sino Iron will not just work, but also keep WA’s iron ore industry globally competitive into the future.
Speaking to reporters at the project yesterday, Chen Zeng — who was appointed chief executive of Citic subsidiary Citic Pacific Mining 2½ years ago with a brief to right the troubled project — said the issues experienced during Sino Iron’s difficult early years were firmly in the past.
“This project has experienced some very challenging periods of time, but at the end of the day we can see that a difference can be made, a result can be delivered, a dream can be realised,” Mr Zeng said. “So while we did have a period of difficult time, we look forward to what we can achieve going forward.”
The project represents China’s biggest ever investment in a mining project outside of China and is, Mr Zeng says, a new generation of iron ore project for Australia. “We still have a lot of work to do but, with the significant investment and the efforts of the team, we have set a very solid foundation for the next stage,” he said.
“This project will deliver significant benefit and value not only to Citic’s shareholders but, more importantly, will deliver value to Australia’s iron ore industry and the state of Western Australia especially.”
Citic earlier this year formally started commissioning of the last two of six processing lines, each of which is responsible for converting the low-grade magnetite ore at Sino Iron into a high-grade concentrate material. The first two lines were a nightmare for Citic, running substantially over budget and behind schedule, but the subsequent four lines had been a very different experience.
The last two lines, he said, were delivered under budget and more than 200 days ahead of schedule.
It is a far cry from those difficult early days, when technical issues were exacerbated by the ugly combination of high labour costs, skills shortages, unfavourable currency moves and a lack of experience in Australian conditions.
The end result is a large integrated iron ore project unlike any other in WA’s world-leading iron ore industry. It is more than just a mine — the project also incorporates a gas-fired combined cycle gas power plant big enough to power Canberra, its own desalination plant and Western Australia’s first trans-shipping operation, which sees concentrate loaded on to barges, towed out to deep water and transferred to ore carriers at sea.
At present, the operation is producing at half of its 24 million tonne per annum production capacity. Mr Zeng believes the project can hit full capacity within 18-24 months as opposed to the three years many are expecting.
Over time, Citic hopes, the memories of the early issues at Sino Iron will be overshadowed by the realisation of the benefits that the higher-grade concentrate from the project provide. Not only does it offer a cleaner source of feed for China’s increasingly environmentally conscious steel mills, but the grade premium will become more valuable as the hematite grades out of WA decrease.
While there may be greater operational certainty at Sino Iron today following the commissioning of the two new processing lines, the same can’t be said about Citic’s ongoing legal battles with former federal MP Clive Palmer.
Citic made Mr Palmer a very rich man when it agreed to pay his private company Mineralogy $US415 million in 2006 for the rights to two billion tonnes of iron ore at Sino Iron. Since then, however, the pair have been at each other’s throats in a series of bitter legal disputes primarily related to forecast royalties payable to Mr Palmer.
They continue to drag on and a resolution any time soon seems unlikely. “We will do whatever we need to do to protect the interests of our company, our workforce and our shareholders, and to some extent the interests of Western Australia,” Mr Zeng said.
Mr Palmer — who on site is commonly referred to as “the landlord” — has managed to have some impact on the operations at Sino Iron. The breakdown in the relationship between Mr Palmer and Citic — who he famously referred to as “Chinese bastards” on live television — makes it difficult for Citic.
“There’s a lot of issues Mineralogy caused to our operation. We don’t deny that. We’ve tried everything,” Mr Zeng said.
The reporter travelled as a guest of Citic Pacific Mining.
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