Citic Pacific

Mining firm to ship iron ore from Australia

PUBLISHED : Thursday, 05 May, 2011, 12:00am
UPDATED : Thursday, 05 May, 2011, 12:00am


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Citic Pacific Mining is set to ship its first consignment of iron ore from its Sino Iron mine in Western Australia later this year after spending US$636 million on a fleet of 12 dry bulk cargo ships.

The ships are part of an estimated US$4 billion investment by Citic Pacific to develop and exploit magnetite iron ore reserves at Cape Preston, 100 kilometres southwest of Karratha in Western Australia's Pilbara region.

The shipment will be the first by a mainland mining company from its own iron ore mine located in Western Australia.

Citic has the rights to mine two billion tonnes of magnetite, which has a higher iron content than other ores and is used to make special steels for industries including automotive components, plant manufacturing, shipbuilding and power generation.

It also has the option to acquire an extra four billion tonnes of magnetite reserves, and is among a growing band of industrial shipowners, that include several mainland power companies, to invest in their own shipping fleets.

One shipbroker said: 'Citic Pacific can more accurately control its transport costs by investing in its own fleet rather than be left to the mercy of a volatile chartering market.'

The first 115,000 deadweight tonnes (dwt) vessel, named Magsenger 1, was delivered by Shanghai's Jiangnan Changxing Heavy Industry at the beginning of this year.

Another six are scheduled for delivery this year starting next month, while the remaining five are due to join the fleet next year as iron ore production increases at the mine.

The mine's six production mills are designed to have a total annual capacity of 24 million tonnes of iron ore.

This, however, could be increased to 27.6 million tonnes a year.

By comparison, with a 20-day return transit between Cape Preston and the mainland, each of the ships can make about 17 round trip voyages for a total of about two million tonnes of iron ore a year.

The mine is projected to have a 25-year life, similar to the 25-27-year life of the ships.

All the vessels, called mini-capes because they have less cargo-carrying capacity than a full-size 180,000 dwt capesize ship, will be registered in Hong Kong.

Shipping sources said the daily operation of the vessels was likely to be contracted to Hong Kong's Anglo-Eastern Ship Management after it won a deal from Citic Pacific to provide crew and management services for Magsenger 1.

Despite these strong connections with Hong Kong, Citic Pacific chose to open a shipping department, which included a chartering manager, in Singapore to oversee the operation of its new vessels while also looking at the possibility of chartering extra vessels.

The company is thought to have chosen Singapore partly to take advantage of significant tax and other incentives offered by the Singapore government to shipping and maritime-related companies. The company may have also chosen Singapore for its more vibrant dry cargo shipbroking community.

The 12 mini-capes will mainly supply iron ore to Citic Pacific's two specialist steelmaking plants, Xingcheng Special Steel in Jiangsu province and Xin Yegang Steel near Huangshi in Hubei province. A wharf at Xingcheng has already been expanded to accommodate the vessels, while ore destined for Xin Yegang will be transshipped at ports along the Yangtze River.

At Cape Preston, the iron ore will be transported by pipeline and conveyor to barges which will transship the ore offshore to load the mini-capes.

While the steel-making capacity at both plants has been expanded, shipping insiders said Citic Pacific would aim to charter about six capesize dry cargo bulk carriers. These ships would add to its cargo-carrying capacity while being able to transport iron ore sold to other steel makers aside from Citic's companies.

Production capacity

The mine's six production mills have a total annual capacity of this many tonnes of iron ore: 24m