china pulls out of $6bn wa project, page-53

Oakajee project not jeopardised:Barnett18:59 AEST Thu Jun 23 2011

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West Australian Premier Colin Barnett says the $4 billion Oakajee port and rail development has not been jeopardised by the closure of a major foundation customer's iron ore project.

However, Mr Barnett says the partners in the Oakajee project will still be under pressure to get the deepwater port and railway development underway.

He says the decision of China's Sinosteel to shut immediately its $2 billion Weld Range iron ore project near Cue in WA, will "help bring the project to a crunch".

"This decision by Sinosteel puts some pressure on Oakajee Port and Rail and every other party to come together and get a workable project," Mr Barnett said.

Mr Barnett said Sinosteel's decision did not come as a surprise and he was confident once the port and rail project was built Sinosteel would restart its operations.

Sinosteel, one of China's largest iron ore traders, said the mine would remain closed until uncertainty around the Oakajee development was resolved and the delays were costing it $100 million a year.

"We are certainly not closing the door on Weld Range, however we must make the right business decisions in order to protect our assets and ensure a realistic future for our organisation," Sinosteel Midwest Corporation chief operating officer Julian Mizera said in a statement.

Sinosteel Midwest is Sinosteel's wholly owned Australian arm.

Oakajee was originally due for completion by 2012 but that had stretched out until 2015, costing Sinosteel $100 million a year, Mr Mizera said.

"Unfortunately we have now had to draw a line in the sand."

Oakajee Port and Rail (OPR), a joint venture between Murchison Metals and Japanese company Mitsubishi, has come under increasing scrutiny following cost blowouts and reports that Mitsubishi intended to pull out of the deal.

Murchison told investors in March the estimated capital costs to develop a deepwater commodity port at Oakajee had blown out by $1 billion.

The port was expected to unlock the value of several new iron ore mines in WA's mid-west region.

Murchison Metals shares were placed in a trading halt on Thursday, after its stock shed more than five per cent on the news to close down 4.5 cents, at 76.5 cents.

Murchison said it expected to make a statement to the market before the start of trading on Monday about the implications for the Oakajee project.

The WA government in April committed $339 million to build the bulk of the port component of the OPR project, a figure matched by the federal government.

Another foundation customer up for Oakajee, Gindalbie Metals, said the project was fundamental to its plans to develop the Karara iron ore project.

Gindalbie shares lost 5.5 cents, or 6.15 per cent, to 84 cents.