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http://au.news.yahoo.com/thewest/business/a/-/business/15509235/citic-denies-problem-at-sino-iron/

CITIC Pacific has hosed down speculation the company's Sino Iron project in the Pilbara faces operational issues amid talk the troubled $8 billion iron ore venture may be unable to produce the planned-for grade of magnetite concentrate.

Sino Iron began commissioning the first train of its ore processing circuits last week. But sources say internal doubts have emerged whether the process can produce a concentrate of above 62 per cent iron content.

CITIC had previously projected the concentrate shipped from Sino Iron would grade 67 per cent to 68 per cent iron. Its royalty agreement with Clive Palmer's Mineralogy would be partly calculated on a shipping grade of 68 per cent, and a lower grade concentrate could undermine the economics of the long-life magnetite mine.

The company opted for a two-stage process to grind the hard magnetite ore into fine particles before magnetic separation.

Gindalbie Metals' Karara project uses a third stage of grinding, and it is understood most other WA magnetite hopefuls believe a third grinding step is necessary to produce high-grade concentrates.

Sources say Sino Iron construction manager China Metallurgical Group Corporation (MCC) is considering including a tertiary milling process for the last four processing trains, which could again inflate construction costs.

But CITIC yesterday rejected the market talk that its project faced grade issues, with a company spokesman saying it was still refining the production process.

"We believe a two-stage grinding process is sufficient to liberate the magnetite," he said. "Our aim is to produce about a 67 per cent iron content product. Naturally, we will continue to finetune the process."

Sino Iron has been a troubled development for CITIC. With first production not likely until next year, the project is several years late and billions of dollars over budget.

CITIC shares were punished last week after it said it was involved in a legal dispute over royalty payments with Mr Palmer, who owns the underlying tenements on which CITIC operates. Late last week the company won an injunction against Mr Palmer preventing the mining magnate from cancelling CITIC's mining rights, with the dispute likely to head back to the courts early next year.

CITIC also faces the prospect of up to $US200 million in penalty payments due in April, triggered if it has not by then shipped at least six million tonnes of concentrate.