aquilla and cape preston, page-7

Aquila denies project tied to Cape Preston port deal



Edited by SEAN SMITH
KATE EMERY



Aquila Resources executive chairman Tony Poli yesterday insisted that the group’s ambitious $4 billion West Pilbara iron ore project was not contingent on gaining access to the tightly controlled Cape Preston port.
Even though it is believed to be in early talks over use of Cape Preston, Aquila said it was considering all development options, including construction of its own deepwater port, as it put a $US3.9 billion ($4.1 billion) price tag on its proposed project.
WestBusiness understands Aquila is in early discussions with fellow iron ore group Mineralogy, which effectively controls access to Cape Preston through a State Agreement.
Aquila has also shied away from naming an alternative port location, fuelling speculation it is banking on striking a deal with the Clive Palmerheaded Mineralogy.
Aquila’s West Pilbara pre-feasibility study, released yesterday, recommended the group build a 160km railway to Cape Preston and said the project could start shipping ore by 2012, with the aim of producing at least 25 million tonnes a year for export.
The news, in addition to a surprise one-for-five bonus issue aimed at improving the stock’s liquidity, sent Aquila shares up 14 per cent, or $2.13, to a record close of $16.90. Red Hill Iron, which also has a stake over part of the project, rose 35¢ to $6.85.
While Mr Poli played down suggestions the group’s plans hinged on an agreement with Mineralogy, he said he was “highly encouraged” by discussions between Mineralogy and Australasian Resources for the latter to construct a deepwater port under Mineralogy’s existing government approvals.
Mr Palmer also holds a majority stake in Australasian.
Hong Kong-based Citic Pacific already has an agreement with Mineralogy to co-develop the Cape Preston port with Australasian. Citic’s proposed iron ore mine is adjacent to Australasian’s.
Mr Poli could not comment on whether Aquila was in talks with Mineralogy but said the project’s prefeasibility study was predicated on the joint venture funding 100 per cent of the cost of a port, with about $US1.7 billion ($1.8 billion) earmarked to cover the rail and port.
The first stage of the project, in which Aquila and US miner AMCI hold a majority interest through a 50:50 share in their Australian Premium Iron joint venture, could produce up to 30 million tonnes a year.
Assuming 2008 prices and forecast operating costs of $US20 ($21) per tonne, it could generate an annual profit of about $US1.3 billion ($1.37 billion) before tax.
A definitive feasibility study will be completed in the second quarter of 2009 and, subject to relevant approvals, construction of the railway could start in the first quarter of 2010.
The group is understood to be considering a number of options to raise its share of the cash to fund the project. Mr Poli also declined to comment on the prospect of a takeover bid for Aquila, which has long been tipped as a likely target.
WestBusiness understands Aquila has been approached by at least one interested party, although a hostile bid is impossible given Mr Poli’s 31 per cent shareholding.
Aquila also has coal projects in Queensland and southern Africa