mmx opens the door 4 chinese investment in opr

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Oakajee may seek Chinese funds
March 3, 2011, 12:00AM

MURCHISON Metals has opened the door to Chinese investment in the planned Oakajee port and rail network, amid speculation that the capital cost of the project has blown out by up to $1.7 billion.

West?Australian Premier?Colin Barnett yesterday raised doubts about Murchison?s financial capacity to drive the massive project as he agreed to a December 31?deadline for the Perth miner and its 50-50 joint venture partner, Japan?s Mitsubishi, to?commit.

Mr Barnett said the project?s?viability could depend on major Chinese or other foreign companies investing in either Murchison or Oakajee Port &?Rail.

?I want to see big balance sheets in there that can actually raise the money without question and fund the project,? the Premier?said.

?That?s really a private issue, however it?s something from a government view I?m?pushing.?

Sources with knowledge of the project said yesterday the budgeted cost of Oakajee had jumped from $4.37bn to as high as $6.1bn. The blowout is due mainly to the rapidly rising cost of steel and equipment since the last?published estimate a year?ago.

There are fears the blowouts could drive up tariffs for mines intending to sign up as customers of OPR, which could make individual projects?unviable.

A spokesman for Murchison said its bankable?feasibility studies would be completed by?June.

?As the studies are not yet complete or final, speculation on the estimated capital cost of the projects is premature,? he?said.

Murchison shares jumped 4.7 per cent to $1.45 after the WA government granted a nine-month extension to?OPR.

In a major backdown, Murchison conceded it was prepared to consider third-party investment in the project in WA?s emerging Mid West iron ore region ?should it be deemed?appropriate?.

This is in stark contrast to Murchison executive chairman Paul Kopejtka?s comments in November when he ruled out the need for any change in the ownership structure of?OPR.

At the time, Mr Kopejtka said China would participate in Oakajee only through the provision of equipment, construction services and?financing.

OPR won the right to develop the project over a Chinese-backed consortium in 2008, a move that angered Beijing given several Chinese state-owned companies are major investors in the Mid West?mines.

Projects including Gindalbie Metals? Karara mine are well advanced and need rail and port infrastructure to begin exporting iron ore to take advantage of record?prices.

Murchison and Mitsubishi are also partners in Crosslands Resources, which is developing the Mid West?s Jack Hills mine. The mine is a foundation customer of the Oakajee infrastructure project. The?Australian revealed last year that doubts were being cast over the Oakajee project in its present form amid rumours that Mitsubishi was looking to exit its partnerships with Murchison and that China was being sourced as a back-up plan for?investment.

Mr Barnett said OPR had until the end of the year to?finalise all?feasibility studies, sign contracts with iron ore mines and reach agreement with the government on construction of the project and operation of the?infrastructure.

He said OPR had agreed to ?rigorous? requirements for monitoring and reporting to the government on their?progress.