PERTH, Nov 30 (Reuters) - Aquila Resources’ funding dispute with its partners on their A$7.4 billion ($7.7 billion) iron ore project in Western Australia has not been resolved but the company said it was hopeful of an agreement early next year.
Aquila aims to build the mine, rail and port with annual iron ore production of 30 million tonnes, but the project has been stalled by a delay in securing funding and regulatory approval, compounded by a slump in commodity prices.
“Unfortunately, the whole project is taking longer, but it’s in an environment where projects do take longer,” Aquila chairman Toni Poli told Reuters after the company’s annual general meeting on Friday.
A budget dispute between Aquila and its partner AMCI (WA), a joint venture between private mining investment and trading group American Metals and Coal International (AMCI) and steel giant POSCO, is further complicating matters.
The partners had been in talks to conserve funds but had not been able to agree on a budget for the 2012/13 financial year.
Aquila is expecting the dispute to be resolved through arbitration by late this year or early next year. One possible outcome of arbitration would be that one party would buy out the other, but Poli said that was unlikely to happen.
“There’s no way we will bought out,” Poli said.
Although the project has faced delays, it may be able to benefit from declining costs, he added.
The West Pilbara Iron Ore project is still waiting for approvals a year after it had expected to get a green light.
Aquila said assuming all major government approvals were in place by the December quarter of 2013, it could start construction by early 2014 and ship its first iron ore by 2017.
Poli said the timeline was conservative and assumed a resolution to the conflict in June 2013. The development could be sped up, with a best case scenario of the project being able to ship iron ore in 2016.
“We’re in an environment where cost pressures have gone -- a few months ago it was important that we hurry, hurry, hurry... you’re better off taking your time a little bit because costs are coming down,” he said.
China and other Asian buyers have been keen to develop alternative supplies for iron ore needed to feed their mills and break the hold of the world’s top three suppliers -- Brazil’s Vale, Rio Tinto and BHP Billiton.
Aquila, 14 percent owned by China’s biggest listed steelmaker, Baoshan Iron & Steel Co, has been counting on China Development Bank to help fund the project.
West Pilbara Iron Ore part of a more than A$290 billion pipeline of planned resource investments in Australia facing increasing uncertainty as funding dries up amid concerns about the outlook for iron ore and coal, and escalating costs.
“We are working very hard to make sure it’s not the next one on ice,” Poli said of the iron ore development.
Last month, Aquila said the estimated cost of the project had jumped from A$6 billion to A$7.4 billion due to a general rise in costs since the previous estimate in 2010 and because of changes in plans for the new port by the Western Australian state government.
Aquila shares were trading down 4.2 percent at $2.30, down from A$6.83 a year ago.