Citic blames Palmer uncertainty as it shelves Sino Iron expansion

Chinese giant Citic has abandoned hundreds of millions of dollars of planned investment into its big Sino Iron project.

Clive Palmer.

Chinese giant Citic has abandoned hundreds of millions of dollars of planned investment into its big Sino Iron project in Western Australia, blaming the decision on the “immediate threat” posed to the mine by Clive Palmer.

In a letter sent to Citic’s West Australian staff on Monday and obtained by The Australian, the chief executive of the Chinese miner’s ­Australian business said the company would no longer go ahead with its planned expansion of its mining fleet and tailings dam and the installation of additional processing facilities until the uncertainty surrounding the project was resolved.

The decision to halt the proposed projects is likely to accelerate job losses across the Sino Iron mine.

Major construction works on the $10 billion-plus mine wrapped up last year, and many of the construction workers were set to roll over on to the additional initiatives.

“I appreciate this might be disappointing,” Citic chief Chen Zeng wrote. “However, after thorough consideration, the board of directors has decided it simply cannot recommend such a major investment until the immediate threats to the continuation of our operations have been addressed.”

Mr Palmer and his private company Mineralogy have been embroiled in various ongoing legal fights with Citic in the past several years.

Citic paid Mr Palmer and Mineralogy $415 million in 2006 to acquire the rights to develop Sino Iron, but the two groups have been at loggerheads over disputed royalties from the project.

The West Australian Supreme Court late last year ordered Citic to pay Mr Palmer interim royalties of more than $US10m and ongoing royalties of $6 per tonne of iron ore while the broader dispute was resolved.

Citic previously has warned that the royalty ruling could jeopardise the future of the mine and is awaiting the judgment from its appeal. It has also flagged that Mr Palmer’s refusal to give his consent to proposed expansions of a stockyard, waste dumps and tailings storage at Sino Iron could also put the operation at risk.

“Mineralogy’s support for these proposals is required before they can be submitted to the state for approval. Mineralogy is not co-­operating,” Mr Zeng said.

Amid growing concerns about the future of Sino Iron, Mr Palmer in February said he was willing to sit down with Citic and peacefully resolve their differences.

The ceasefire proved short-lived, however, with Mr Palmer accusing Citic of offering to send an insufficiently senior executive and a spy to meet with him.

In the letter to staff, Mr Zeng said the dispute with Mr Palmer put the entire project at risk.

“Some of Mineralogy’s claims threaten our ability to continue operations, others affect the economic viability of the project,” he said.

“We’re doing everything possible to find solutions, which assist Sino Iron’s long-term sustainability and give our parent company the confidence to support further capital investment.”