rising costs puts cloud over murchison

Rising costs puts cloud over Murchison

PETER KLINGER, The West Australian
June 9, 2011, 7:00 am

Murchison Metals shares have slumped to their lowest level since April 2009 amid increased investor concern the company is struggling to contain the cost of its Oakajee project just three weeks out from completing a bankable feasibility study for the venture.

Murchison has until the end of the month to release feasibility studies for the Oakajee Port and Rail development and the associated Jack Hills iron ore mine, which will end months of speculation about the capital cost for WA's most important infrastructure project.

Talk around Perth this week suggested the cost of OPR may have ballooned to as much as $8 billion.

Murchison admitted in March that the cost of OPR cost was likely to be $5.2 billion, up from earlier guidance of $4.3 billion. The admission coincided with market talk of a $6 billion price tag, while the latest rumours centre on a cost of $7 billion to $8 billion.

"There's no basis to that suggestion," a Murchison spokesman said last night about the speculation.

The actual cost of developing the port at Oakajee, north of Geraldton, and building a 570km railway line is crucial to OPR's foundation customers Gindalbie Metals and Sinosteel MidWest, which fear they will be saddled with prohibitive tariffs to underpin the development of the infrastructure.

Gindalbie and Sinosteel are trying to muscle their way into the OPR consortium, a move supported by Premier Colin Barnett but vehemently resisted by Murchison. Gindalbie and Sinosteel argue that the only viable way of developing the Oakajee infrastructure is with Chinese help.

Murchison shares fell a further 4? to 87? yesterday, taking its losses to 11 per cent since influential retail broker Patersons Securities last week downgraded its stock recommendation from hold to avoid because the shares were "too risky for the majority" of its clients.

http://au.news.yahoo.com/thewest/business/a/-/wa/9608179/rising-costs-puts-cloud-over-murchison/