Hong Kong-based Chinese raw materials supplier CITIC Pacific announced on July 15 a delay in production and export of concentrate to the first half of 2012 instead of end-2011 in the company's Sino Iron magnetite project in Western Australia.
CITIC announced in the same statement that the company's engineering, procurement and construction (EPC) contractor China Metallurgical Group Corporation (MCC) had put forward a proposal for an additional payment of around $900 million as design changes increased project cost. The MCC claim would bring Sino Iron's development cost to AUD 6.1 billion, compared to CITIC's original budget of AUD 3.5 billion.
CITIC said that "Although CITIC Pacific is clearly disappointed with the performance of MCC and any cost increase, additional expenditure is necessary to complete the project." According to the company's announcement the increased steel production in China and other emerging countries led to a continued rise in the price of iron ore. This in turn significantly increased the construction costs in most iron ore mining projects in Australia as a result of factors such as labor shortages, the rise in the value of the Australian dollar, and higher costs of equipment and construction materials.
The project is the largest magnetite iron ore project under development in the world. It is also the first large scale production line in the world employing advanced technology to process magnetite iron ore.