MELBOURNE Feb 6 China's CITIC Pacific Ltd
took a public swipe at Australian billionaire Clive
Palmer on Thursday over his attempts to halt its long delayed
and massively over-budget $8 billion iron ore project in
The Sino Iron project, China's biggest offshore mining
investment, was to be a key prong in Beijing's strategy to ease
its dependence on the world's dominant iron ore producers, Vale
, Rio Tinto and BHP Billiton
But instead it has been a disaster for CITIC Pacific and its
contractor, Metallurgical Corp of China (MCC), as
they ran into regulatory hurdles, labour shortages, disputes
over hiring Chinese workers, safety issues and soaring costs.
To add to its woes, tycoon Clive Palmer, who sold the rights
to the ore to CITIC Pacific, has sued it for what he says are
hundreds of millions of dollars owed in royalties and tried to
block CITIC's port access.
To date, while Palmer has made statements attacking the
Chinese developers, CITIC Pacific has focused on defending its
case in the courts rather than hitting back.
However on Thursday, CITIC Pacific President Zhang Jijing
was frank about the poor relationship with Palmer, who recently
won a seat in Australia's parliament after creating his own
political party and is ploughing ahead with plans to build a
replica of the Titanic.
"Any claim that we haven't paid our fair share in accordance
with agreements is just plain rubbish," he told an audience of
670 mining industry executives, bankers and lawyers in
Zhang was even more open when asked how the relationship
with Palmer had soured so badly.
"That's a question I always ask myself," he said, noting he
was not new to doing deals in Australia. "I have never met such
a person like this gentleman."
He said commercial disputes were not unusual and CITIC
Pacific always preferred them to be sorted out away from the
public spotlight, but that was an "unrealistic expectation" with
"some larger-than-life characters involved".
The current dispute between Palmer and CITIC Pacific is over
a royalty stream, called Royalty B, potentially involving around
A$200 million owed. Zhang said the industry benchmarks under
which Royalty B was to be calculated no longer exist, so the
method of calculation needs to be resolved.
Palmer was unrepentant in response to Zhang's comments.
"The proposition is CITIC wants to come here and suggest the
main consideration can't be calculated, yet they still want to
take our resources back to China without paying for them,"
Palmer's company Mineralogy said in an emailed statement.
"In our opinion this is tantamount to stealing, and most
Australians would be in agreement."
CITIC Pacific, controlled by state-owned CITIC Group,
shipped its first ore to one of its steel mills in December,
more than three years behind schedule at nearly quadruple the
original cost, with only one out of six 4-million-tonnes-a-year
production lines running so far.
By comparison, in the three years that its project has been
delayed, the top three Australian iron ore producers have
expanded their annual output by more than 190 million tonnes.
Zhang said the project's progress and the legal fight were
being closely watched by other Chinese firms eyeing investments
in Australia, including other magnetite iron ore projects in
CITIC Pacific's shares sank to a four-year low of HK$7.90
last June then surged 55 percent to HK$12.28 by December when it
loaded its first ore shipment. The stock has since slipped to
HK$9.47 as iron ore prices have dropped to seven-month lows.
(Editing by Richard Pullin)