citic

UPDATE 1-CITIC Pacific says Australian mine capex up 40 pct
Mon Mar 17, 2008 4:44am EDT
By Ruth Wong

HONG KONG, March 17 (Reuters) - Beijing-backed property-to-steel conglomerate CITIC Pacific (0267.HK: Quote, Profile, Research) said on Monday the capital expenditure needed for its iron ore mine in Australia will rise to $3.5 billion from an estimated $2.5 billion.

The 40 percent rise in capital expenditure requirement for the mine in the Pilbara region of Western Australia was a result of appreciation of the Australian dollar against the U.S. dollar, CITIC Pacific Chairman Larry Yung told a news conference.

China is the world's largest iron ore importer to feed the world's largest steel industry.

CITIC Pacific, which focuses on special steel manufacturing, iron ore mining and property development in in China, has joined its domestic rivals to step up acquisition of raw material assets at home and overseas.

"To ensure the supply of these important raw materials, we invested in iron ore mining, coking coal mining and coke production facilities," Yung said.

The company recently paid HK$1.6 billion ($206 million) for a 30 percent interest in a coal mine located in China's eastern province of Shandong.

"We will continue to invest in coal mines at suitable terms," he said.

CITIC Pacific has total mining rights of two billion tonnes of ore in the project, which is capable of producing 27.6 million tonnes of products a year after production starts in 2009 or 2010, Yung said.

"Our mine, upon completion, will provide a long-term stable supply of iron ore to our steel plants and to other steel manufacturers in China," he said in a statement.

The Australian project will require US$1 billion of capital expenditure this year, he added.

CITIC Pacific said its special steel business has expanded rapidly and become the main growth driver for its recurring earnings with profit contribution rising 68 percent in 2007 to HK$2.24 billion.

It reported net profit of HK$10.84 billion last year, up 31 percent from 1006.