$2.5 billion Eyre Peninsula mining project goes back to the drawing board

DEVELOPMENT of one of the state's largest potential mining and port projects has stalled with its backers going back to the drawing board.

DEVELOPMENT of one of the state's largest potential mining and port projects has stalled with its backers going back to the drawing board.

The $2.5 billion Fusion iron ore project on the Eyre Peninsula, which is a joint venture between Centrex Metals and China's Wuhan Iron and Steel Co. (WISCO), will be "rescoped and rescheduled to take into account recent changes in iron ore market conditions''.

This time last year the company said it hoped to be in a position to make a decision to mine at about this time, but instead the project will move back into the prefeasibility stage - the first step of mine planning.

The definitive feasibility study was originally meant to be finished early this year with a six month bankable feasibility study to follow, but instead up to another two years will be spent proving up the project.

The project involves a magnetite iron ore mine which would feed into a 20 million tonne per year port at Port Spencer near Tumby Bay. The port is a separate joint venture between the two companies.

The joint venture will now restart exploration at the Fusion project.

"This will see the project move back into a prefeasibility study over the next 12 to 24 months to assess the expanded project,'' Centrex said.

"A major goal of negotiating amendments to the current joint venture for Centrex is also to find a funding solution through to the end of a bankable feasibility study at Fusion that is isolated from Centrex's current cash reserves.''

At the end of the prefeasibility study, if the joint venture decides to go ahead with the project, it will either seek to separately list Fusion on the Australian Securities Exchange, or bring a third party investor in to pay for a bankable feasibility study. If WISCO does not want to develop it, a trade sale would be sought.

As part of the restructure Centrex will forego up to $108 million in incentive payments, which would have been paid when various resource milestones were reached.

The project would have created more than 1000 jobs in construction and 1240 ongoing jobs.

Centrex shares were untraded on 12.5c.