* Lower royalty rate aims to jumpstart stalled projects
* Delayed $6-bln Oakajee Port & Rail project expects to
* Others that could gain are $8-bln Sino-Iron project and
By Rebekah Kebede and Sonali Paul
PERTH/SYDNEY, Nov 21 The state of Western
Australia may extend a concession on royalty rates to producers
of magnetite iron ore, in a bid to jumpstart projects stalled by
a slump in demand for the steel-making raw material, its premier
said on Wednesday.
Magnetite iron ore is a low grade that requires expensive
processing before being exported, making such projects much
tougher to justify, compared with the ore produced by giants Rio
Tinto and BHP Billiton.
Colin Barnett said the state, which produces nearly all of
Australia's iron ore, would consider lower royalty rates in the
expensive start-up phase of magnetite projects, but the plan
still needed to be approved.
"We will sit down with each of the iron ore producers and
discuss with them and provide a royalty concession through the
initial start-up stages," Barnett told a conference in Perth.
Iron ore prices at $120 a tonne have recovered from a slump
in September to a three-year low below $87, but are down almost
13 percent this year, after a loss of more than 18 percent last
Development of Western Australia's magnetite projects is key
to spurring development of the A$5.9-billion ($6.1 billion)
Oakajee Port and Rail project, which Japan's Mitsubishi Corp
put on ice two weeks ago after failing to find a
partner, despite talks with Chinese companies.
OAKAJEE HOPE TO RESUME TALKS NEXT YEAR
Oakajee Port and Rail hopes to resume the discussions next
year, Chief Executive John Langoulant told reporters.
"Negotiations, up until recent months, had been tracking
along pretty well. We are hoping they get reinvigorated in the
new year," he said, adding that the lull was possibly due to
last week's leadership change in China.
Barnett, who faces re-election next March, has long flagged
the development of Oakajee as a new industrial hub as one of his
"It's a big day for magnetite because for the premier to
announce that there will be a blanket concession rate for
start-up projects, it is really going to help with investment
attraction," said Megan Anwyl, executive director of mining
industry body the Magnetite Network.
"The premier has made it clear that the state government
wants to get behind the magnetite industry," Anwyl told Reuters.
A royalty concession would benefit Citic Pacific's
$8-billion Sino-Iron project, which is on the verge of starting
up, two years behind schedule, and Gindalbie Metals,
which recently started commissioning at its Karara iron ore
project, co-owned with China's Angang Steel.
Oakajee's Langoulant said the royalty relief would help the
stalled infrastructure development as well, adding that the mine
needed to export at least 35 million tonnes to be able to fund
"We need to get other mines up and running... You need
substantial tonnages of iron ore to be able to finance (the port
and rail development)," he said.
Other miners studying magnetite projects include Mitsubishi,
which has slowed its $3.7-billion Jack Hills magnetite project,
Fortescue Metals Group with Baoshan Iron & Steel
, and Grange Resources.
The state wanted to send a signal to China and Japan that it
was not going to tax the magnetite industry out of existence,
"We're going to do exactly the opposite and we're going to
lower royalty rates during those start up years to give a
positive endorsement and to see this industry get underway," he
said. But his office declined further comment on the measure.