Hong Kong-based conglomerate CITIC Pacific has stated that it has signed a third supplemental agreement with China Metallurgical Group Co. (MCC), the engineering, procurement and construction (EPC) contractor for the processing part of CITIC Pacific's Sino Iron project in Western Australia. After an extensive review and negotiations, CITIC Pacific has agreed to pay MCC an additional $822 million. Accordingly, the cost of the project has increased to $3.41 billion.
This is the third time the costs have increased since the original contract was signed in 2007. The higher costs have been due to factors such as labor shortages, the rise in the value of the Australia dollar and higher costs of equipment and construction materials, which MCC had not taken into consideration.
CITIC Pacific also stated that the latest additional payment will be used to complete the construction and commissioning of the first and second production lines of the project. MCC is contractually committed to completing construction of the first production lines before May 31 this year, with the first and second production lines due to commence production no later than August 31 and December 31 of the current year, respectively.