not fit for purpose, page-2

plan not 'fit for purpose' - Gindalbie boss
by: Nick Evans, Business Reporter From: PerthNow November 10, 2011 2:52PM Increase Text Size Decrease Text Size Print Email Share Add to Digg Add to del.icio.us Add to Facebook Add to Kwoff Add to Myspace Add to Newsvine What are these?

TROUBLED: Oakajee Port & Rail's proposed port and rail project north of Geraldton. Picture: supplied Source: Supplied

THE fate of the troubled Oakajee project is unlikely to be decided before the middle of next year, according to Gindalbie Metals chairman George Jones.

Gindalbie is likely to one of the port and rail project’s biggest customers when it is built, and Mr Jones said the company has been playing its part in rescue discussions.

Speaking on the sidelines of the company’s annual general meeting today, Mr Jones flagged big changes to the current proposals, which he described as “grandiose”.

“There is enough business in the Mid West to justify Oakajee, it’s just got to get commercially done.

“I think the current proposal is not what I call ‘fit for purpose’. It’s a grandiose, Rolls Royce solution, presuming there’s a perfect world out there,” he said.

Oakajee Port and Rail’s current plans involve the simultaneous construction of a major port outside Geraldton, and a 600km rail loop to link a number of proposed Mid West mining projects, all at different stages of development.

Start of sidebar. Skip to end of sidebar.
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The $6 billion project, currently run by Murchison Metals and Japan’s Mitsubishi, ran into trouble earlier this year over its projected cost, and an inability to reach agreement with foundation clients over rail haulage costs.

The State Government stepped in after the withdrawal of foundation client Sinosteel Midwest parked its Weld Range project in June, and after Murchison Metals admitted it would have trouble meetings its half of the financial obligations for the project.

Murchison and Mitsubishi have until the end of the year to provide certainty on plans or funding, or risk losing their exclusive right to develop the project.

While praising the State Government’s efforts to date, Mr Jones said it was unlikely solutions would be found soon.

“We can’t do anything until the current arrangements with the government are clearer. It could take as long as the middle of next year before it’s clear where it’s going,” he said.

“I couldn’t see construction starting, if everything goes really well, until towards the end of 2013. And you’re talking about 2015/16 before it’s operational.”

While Mr Jones said Murchison and Mitsubishi are likely to still play a role in the eventual solution, he also gave the clearest indication yet that OPR’s former rival, Yilgarn Infrastructure, may find a seat back at the development table.

Chinese-backed Yilgarn lost out in the bidding process to OPR, but the intellectual property generated by the company was picked up by junior exploration company Padbury Mining earlier this year.

Padbury is known to have recently updated the capital and operational expenditure, and commercial modelling on their proposal. A spokesperson for Padbury said this afternoon the company had conducted the work in the hope of being able to “contribute to a solution” to infrastructure issues in the Mid West.

Aside from a difference in the rail corridor alignment, the major difference between the Yilgarn and OPR plan is that the former’s plan would have taken on longer term debt, and made it easier for companies using the infrastructure to take equity stakes in the project – an option Gindalbie has previously said it would be happy to consider.

Mr Jones said he believes the Yilgarn model has some advantages over the OPR plan, and he expects the final solution to the Oakajee problem to include aspects of Yilgarn’s proposal.

“Their model was fundamentally OK, and I’d be surprised if it wasn’t factored into the mix going forward. I’m encouraging that, because basically it was structured the right way, in my view,” said Mr Jones.

“I don’t think it will end up exactly [the Yilgarn] way, but I think elements of it will be included. Their proposal was more fit for purpose than the OPR one is.”