SYDNEY, April 22 China's CITIC Pacific
is delaying completion of its $8 billion Sino Iron project in
Australia until late May because of engineering problems, the
latest in a series of setbacks to plague China's single-largest
foreign mining investment.
Sino Iron had already missed a February start date for the
project, which was originally expected to ship its first ore in
2010 to Asian steel mills eager to cut reliance on
mega-suppliers Vale, Rio Tinto and BHP
CITIC Pacific is set on Tuesday and Wednesday to face
Australian mining magnate Clive Palmer's company Mineralogy Pty
Ltd, which holds lease rights to the project, in the Supreme
Court of Western Australia in a dispute over royalty payments.
Mineralogy believes CITIC Pacific should already be paying
royalties, distilling the case down to a clause in the
right-to-mine pact that states a royalty must be paid when the
ore is taken.
Mineralogy contends "taken" means when ore is mined. CITIC
Pacific's interpretation of the term is when ore is exported.
Palmer says CITIC Pacific owes him as much as A$200 million
in back royalties, including penalties. CITIC Pacific has denied
Iron ore prices are showing greater resilience amid a wider
outflow of capital from commodities, such as copper, which saw
its biggest weekly loss last week since late
Iron ore is benefiting from restocking of inventories by
steel mills in China, suggesting any supply disruptions could
have a greater impact on market fundamentals than would happen
in a softer market.
Chinese steel production rose by just over 10 percent in the
first three months of 2013, while the three major suppliers
managed collective annual production growth of just 1.4 percent
in the first quarter.
"As defects are exposed and repaired during the
commissioning process, future stability of the production line
will be improved," CITIC Pacific said in a statement late on
Friday. "First shipment of iron ore concentrate is expected to
be in the second half of May 2013."
Metallurgical Corp of China , the firm
building the project, is sticking to an eventual production rate
of 24 million tonnes of iron ore concentrate, which is used to
make high-iron content pellets fed to its own steel mills and
those of other producers in China.
CITIC Pacific and MCC were in a separate dispute over delays
and cost increases after CITIC Pacific last year revealed a
four-fold increase in the budget, to $8 billion.
MCC has since agreed to contribute $858 million to complete
(Reporting by James Regan; Editing by Clarence Fernandez)