small run, page-10

August was the last update I could see.....once CP gets his royalties hopefully we will see further movement / cash to develop the long awaited BSIOP. Suspect additional corporate funding will entail further dilution of long suffering small shareholders.

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BILLIONAIRE and prime ministerial aspirant Clive Palmer will be forced to wait even longer to receive massive royalties from the $US8 billion Sino Iron mine in the Pilbara after China's Citic Pacific admitted it had failed to fix a major technical problem that halted work in April.

In a report to shareholders, Citic did not provide a fresh estimate for when magnetite exports would begin from the project, but did concede that shipments could not start until the resolution of a messy legal dispute with Mr Palmer over security plans at the Cape Preston port.

The Hong Kong-based conglomerate's half-year net profit slumped 19 per cent to $HK4.46bn ($631m), largely due to rising costs in Australia.

Citic has missed every deadline it has set on the disastrous Sino Iron project, which is now almost four years behind schedule and at least $US6.5bn ($7.1bn) over its original budget.

The long wait has frustrated Mr Palmer, who is campaigning to become prime minister at the September 7 federal election while fighting several legal battles with Citic.

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Mr Palmer's company, Mineralogy, is due to start receiving royalties worth hundreds of millions of dollars a year from the Sino Iron mine when exports begin.

However, he is entitled to receive a small amount of royalties based on the fact that some of the ore from the mine has already been stockpiled at the port.

Citic purchased the tenements that make up the project from Mr Palmer in 2006.

A spokesman for Mr Palmer said yesterday that Mineralogy had received royalties from Citic Pacific mine, but the amount would not be disclosed.

Citic chairman Chang Zhenming told shareholders that the commissioning of Sino Iron's first production line had restarted late last month after being suspended in May due to technical problems.

"So far, things are going well -- most of the major issues we encountered have been addressed and we have achieved continuous production," Mr Chang said. "What we have learned from this commissioning is that the processing technology employed is viable and capable of producing good quality iron ore concentrate, which has an average iron content of about 66 per cent.

"Building a greenfield project is complex and has not been smooth sailing for us, but I am pleased that we have proven we have the technical knowledge and management expertise to build and operate the mine.

"However, the recommissioning is still very recent, and for a project of this massive scale and complexity, more time and data are required to gain further insight into production parameters, line stability and reliability."

Mr Chang's update on Sino Iron's critical second production line was not so positive.

He said work to fix a gearless motor responsible for driving the grinding mill was taking longer than anticipated.

He did not provide an estimate of when the problem would be fixed.

"Load commissioning can only begin when the motor passes the required voltage test," he said.

"If the test is not successful, we will need to reassess the situation and develop an appropriate action plan.

"This would be a significant task and further push back the commissioning of line two.

"All parties are working closely with the manufacturer, Siemens, which made the gearless motor specifically for our project.

"Our focus for the next six months will be to ensure the stable running of production line one, ramping it up to full capacity as soon as possible, as well as getting the second production line ready for load commissioning."

Mr Chang said iron ore concentrate produced from the first production line had been stockpiled near the port at Cape Preston.

"The first shipment will be arranged once the relevant authorities grant permission to do so," he said in a reference to a legal dispute with Mr Palmer.

Mr Palmer has taken action in the Federal Court in an attempt to have his company Mineralogy appointed as the security controller of the Cape Preston Port.

The federal government must approve a port security manager before exports can occur.

The matter is due to be heard in the Federal Court next month.