Shares in Murchison Metals have been placed in a trading halt amid speculation the company is in talks to sell its interests in the troubled Oakajee Port and Rail project in Western Australia's Mid West.
Murchison has conceded it cannot fund its share of the Oakajee Port and Rail development or its Jack Hills iron ore deposit, estimated at $10 billion.
Resources analyst Peter Strachan believes the mystery buyer may be Murchison's Japanese joint venture partner Mitsubishi.
"They would certainly have front running as they would understand all of the numbers and I think the Japanese partners there are quite keen to secure iron ore for the long-term future of their steel making activities in Japan," he said.
"Of course, they are having to compete fairly aggressively with interests out of China."
The Premier Colin Barnett says he would welcome a restructure of the Oakajee project.
He will not comment on the speculation Mitsubishi is in talks to buy out Murchison Metals' share of the development.
But, Mr Barnett says a restructure is overdue.
"I think what we are seeing now is what I've been waiting for for some time, and that's a re-arranging in the ownership structure of Oakajee Port and Rail," he said.
"That is important for the project to go ahead."
Mr Strachan says it's good news for iron ore projects in the region.
"I think it's probably the only outcome that's going to save those projects," he said.
"The thing about iron ore is that it's not a rare commodity, what's rare is having iron ore with access to a port and a railway line, so the transport infrastructure is the real key element in looking at iron ore."
The analyst says capital and operating costs for the project have been driven up.
"What we have seen over the last two or three years of evaluation is that the capital costs have risen in part because the cost of steel has risen with iron ore prices and the coal prices rise means that the cost of steel increase so the cost of putting a railway in the ground also increases.
"Also wage costs and other costs have risen, operating costs are going to be higher so these magnetite concentrates that the project in the Mid West wants to produce are going to be very high cost by world standards.
"Compared to the Pilbara, direct shipping haematites products which are somewhere between $24 and $45 a tonne to put on a ship these magnetite concentrates are going to be upwards of $65 a tonne to put on a ship at Oakajee or in Geraldton."
MMX Price at posting:
27.5¢ Sentiment: Hold Disclosure: Held
