Citic Pacific Says Australian Iron Ore Project Cost Rises 10%
By Helen Yuan
Aug. 28 (Bloomberg) -- Citic Pacific Ltd., the Hong Kong arm of China's biggest state-owned investment company, said the building cost for its iron-ore mining project in Australia would rise by 10 percent as it prepares for further expansion.
Expenditure would rise to $3.85 billion from $3.5 billion, Chairman Larry Yung said today at a press conference in Hong Kong. The company plans to expand from an expected 27.6 million metric tons of annual output, he said, without giving details.
Citic Pacific needs to build the iron ore project on time and on budget or its stock price may drop, Macquarie Securities Ltd. said in June. As mining companies compete for resources, project costs have jumped 40 percent in the past five years, according to Rio Tinto Group.
``The increased cost is still manageable,'' said Yung.
Citic Pacific fell 3.2 percent to HK$27.10 in Hong Kong trading after posting a 12 percent decline in first-half profit partly on higher costs.
The first shipment to China from the project at Cape Preston in the Pilbara region will start in the fourth quarter of 2009, Leslie Chang, deputy managing director, said today. The company will need half of the iron ore output to feed its steel plants, he said.
Iron ore prices almost doubled this year on rising demand from Chinese steelmakers.
The company previously said the project will start in 2009 to early 2010. The project may cost A$5.2 billion ($4.5 billion), it said in November. That estimate included debt as well as building costs, Yung said today.
Citic Pacific has obtained environmental approval for most stages of the project, Chang said.
The Hong Kong-based company has ordered 12 vessels of 115,000 deadweight tons each to carry the steelmaking ingredient. The first ship will be delivered around the end of next year, Chang said. Citic Pacific will need to lease more ships to carry the iron ore, Yung said.
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