Lai SeeClive Palmer's Citic Pacific suit adds to his China risk

The mining cognoscenti in Hong Kong will be familiar with Clive Palmer for having the distinction of having made four unsuccessful attempts to list his company Resourcehouse on the Hong Kong stock exchange.

One of Australia's richest persons, he is hardly ever far from the headlines there, whether it's to do with mining politics, football or golf. He also has the distinction of being one of the most litigious persons in Australia.

It is in this connection that we see that he is back in the headlines on account of taking out a lawsuit against Hong Kong-listed but state-controlled Citic Pacific. Palmer is threatening to terminate Citic Pacific's rights to mine iron ore from the nearly completed US$8 billion Sino Iron project being built on Palmer's mining ground in Western Australia's Pilbara.

The "deal of the century" as analysts call it because it heavily favours Palmer, has taken a heavy toll of Citic. Its original budget of US$2.47 billion has blown out to US$8 billion and could get as high as US$10 billion.

Citic has had to build the entire infrastructure, the port, power plant, desalination plant, and the mine. Citic has replied to Palmer's suit by taking out an injunction against his claims.

In addition to these costs a bungled attempt at hedging its Australian dollar risk has exposed Citic to a further US$2 billion in losses and cost former chairman Larry Yung Chi-kin his job. One can only assume that relations between the two sides have reached the point of no return. Because suing Citic Pacific is as near as it gets to suing the Chinese state, the chances of Palmer doing any further business with mainland entities after this must surely be remote.