chinese press ahead with pilbara iron project
Looks like the game is on. CITIC Pacific, the Hong Kong conglomerate headed by Chinese billionaire Larry Yung, has said it is pushing full steam ahead with its plans for a $US2.5 billion ($A3.2 billion) Cape Preston iron ore project in the Pilbara.
The move is part of the quest by Chinese steel makers to escape their dependence on mining giants BHP Billiton, Rio Tinto and CVRD of Brazil.
Citic Pacific, owned 29 per cent by China's biggest overseas trading groups, in July paid Australian businessman Clive Palmer $A290 million in cash for the initial mining rights to 1 billion tonnes of magnetite at its Balmoral deposits, south of Cape Preston, where it plans to build Western Australia's first magnetite mining and processing venture by 2010.
It also holds options to mine up to 6 billion tonnes and expects the venture to become China's single biggest direct investment in Australia's iron ore industry in a few years.
Citic Pacific managing director Henry Fan, speaking from Hong Kong, said the company had been working flat out at Cape Preston since the deal was struck, with intensive drilling under way to confirm reserves before a decision to exercise its rights to a second billion tonnes.
"So far the outcome has been encouraging in terms of confirming stage two of the project, involving another 1 billion tonnes, although a final decision is yet to be taken," Mr Fan said.
Under Citic's agreement with Mr Palmer's private Mineralogy group, it must pay another $US200 million in July for the rights to the second billion tonnes. It can also take up the rights to another 4 billion tonnes in $US200 million instalments in subsequent years.
Crucially, Mr Fan revealed Citic had locked in a long-term financing agreement to develop the project and had selected its lead construction contractor.
The financing was for 100 per cent of the project cost on a 25-year basis from a mainland Chinese bank, he said. Citic expected to bring in a mainland steel producer as a 50 per cent partner, but would retain control.
Citic has previously forecast the cost of the initial magnetite mine, concentrator and pellet plant at $US1.37 billion, with the second stage forecast to cost $US1.1 billion.
Mr Palmer said in July that total investment should top $7 billion, with export revenue from stage one alone expected to pass $1 billion a year. He will be the biggest beneficiary, with Mineralogy entitled to royalties of up to $600 million a year once the project is developed. It will also be entitled to 6 to 10 per cent of production volumes.
Citic is one of several Chinese groups backing iron ore developments in WA to secure independent supplies for China's steel industry.
For example, Anshan Iron & Steel is partnering with Gindalbie Metals in the planned $1 billion Karara magnetite project.
WEST AUSTRALIAN
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