Citic Pacific

Citic Pacific launches iron mine in Australia

PUBLISHED : Tuesday, 27 November, 2007, 12:00am
UPDATED : Friday, 28 October, 2016, 9:17am

Red-chip conglomerate Citic Pacific has launched a A$5.2 billion (HK$35.8 billion) iron ore mining project in Western Australia where a battle for the commodity's supply is heating up.

The mainland's newly formed investment fund, China Investment Corp, was reported to have broadsided the world's largest mining conglomerate's bid to take over London-traded miner Rio Tinto. CIC has since denied the report.

Citic Pacific owns 80 per cent of the Australian project while China Metallurgical Group, a state-owned construction contractor, holds the balance. The latter also will be responsible for the building work.

Launching the Sino Iron project at Cape Preston, 100km southwest of Karratha in the Pilbara region yesterday, Citic Pacific chairman Larry Yung Chi-kin said the group would start building processing and support infrastructure next year, pending government approval.

He expects the mine to export 27.6 million tonnes of a mix of high-grade iron pellets and concentrates annually over 25 years to Citic steel mills in Jianyin in Jiangsu; Huangshi in Hubei and Shijiazhuang in Hebei, with excess production to meet needs of third-party steel mills.

'This project is very significant for our company because it will deliver an integrated steel business during a time of advancing economic development in China,' Mr Yung said.

He added that production output could be raised to more than 70 million tonnes annually.

Brokerage Lehman Brothers valued the group's special steel and iron ore division at HK$52.2 billion or 43.68 per cent of its HK$119.48 billion net asset value next year.

Johnson Chan, OCBC Bank's head of structured trade finance for North Asia, said the price of iron ore had about doubled from US$90 per tonne (including freight) at the beginning of the year to about US$190.

He said a rumoured alliance between CIC and several state-owned steelmakers would make sense to counter BHP Billiton's US$150 billion offer for smaller rival Rio Tinto.

Both BHP and Rio Tinto have iron ore mines in the Pilbara region.

'China will have to pay a lot more for importing iron ore if BHP's bid for Rio Tinto succeeds,' Mr Chan said.