One of China's most expensive overseas mining assets will commence production following several highly fraught years of preparation.
Hong Kong-listed CITIC Pacific has announced that the Sino Iron project in the Pilbara is “now moving into the production stage” after around four years of successive delays and huge cost blowouts.
The commission of the first of two production lines for the project began as early as July, with CITIC now hoping to focus over the next few months on ensuring its stable operation as it gradually brings it up to full capacity.
CITIC hopes the project will eventually produce around 24 million tonnes of iron ore concentrate per annum, with that ore being delivered to the company’s own steel plants as well as other steel manufacturers in China.
Despite tepid prices for iron ore over the past year as a result of China’s slowing economic growth, the world’s second largest economy will continue to retain a gargantuan appetite for the commodity in future due to its importance as the key raw material for all the steel the country needs to realize its modernization plans.
While CITIC originally hoped its Sino Iron project in the Pilbara would rapidly become a major force in supplying iron ore to China when it first purchased rights to the deposits from mining tycoon Clive Palmer six years ago, the project has since been severely beleaguered by delays, cost blowouts and legal complications.
The cost of the project was originally pegged at around $2.5 billion, but has since surged to nearly $8 billion, while production itself is a good four years behind schedule.
The project is also beset by an ongoing legal stoush between CITIC Pacific and Palmer, who claims his private company Mineralogy is owed hundreds of millions of dollars in royalties from the Chinese for access to the deposits.
While CITIC Pacific is listed and headquartered in Hong Kong, it remains firmly under the control of the Chinese government, with 58 per cent of equity held by Beijing’s state-owned CITIC Group.
CITIC Pacific’s own executives have blamed the troubles which have thus plagued the project on their own inexperience and that of contractor Metallurgical Corp of China (MCC) in undertaking a project of this scale in Australia.