Citic Pacific's US$448m sale of Australia mine stake boosts shares

Shares of Citic Pacific jumped 2.44 per cent yesterday on news the red-chip conglomerate has agreed to sell a 20 per cent stake in a Western Australian mining project to state-owned construction contractor China Metallurgical Group for US$448 million.

China Metallurgical, which has amassed a portfolio of US$1 billion worth of mining assets overseas, was originally responsible for construction works at the mine, called Sino-Iron, in the Pilbara region.

Citic and China Metallurgical also agreed to revise the contract sum of the Sino-Iron mine to US$1.75 billion from US$1.1 billion.

Citic said the selling price of the 20 per cent stake was based on the amount it is spending on Sino-Iron, including the US$498 million it has already ploughed into the project and the US$1.73 billion in outstanding contractual commitments as of the end of last month.

Citic said the decision to sell a substantial interest to China Metallurgical would generate economies of scale and significant operational efficiency and cost savings. Citic will retain 80 per cent of the project.

The company added that the proceeds from the deal would be used to finance the mining activities in the Pilbara region.

With an 18 billion yuan revenue and 83 billion yuan worth of assets last year, China Metallurgical holds interests in overseas mines of gold, copper, iron ore and lead, according to the corporation's website.