Letter shows bitterness of Palmer's China rift

CLIVE Palmer issued a written edict to a Chinese company requiring it to shut down its $7bn iron ore project within 60 days.

CLIVE Palmer issued a written edict to a Chinese government-controlled company requiring it to shut down its $7 billion-plus iron ore project within 60 days, sack several thousand workers and remove infrastructure it has been developing for a decade.

The demands in Mr Palmer's legal letter, leaked to The Australian yesterday, highlight the bitterness of a dispute that has put billions of dollars of investment at stake with potential to disrupt commercial and political relationships with the Chinese.

The litigation strategy of Mr Palmer and his company Mineralogy was criticised as "absurd" by West Australian Supreme Court judge James Edelman on Wednesday amid a row over royalties from the mining of iron ore in the Pilbara region. Justice Edelman said Mineralogy's pleas for an urgent trial "ring hollow" after its many delays.

In the leaked November 22 letter, China's Citic Pacific was told by Mineralogy deputy chairman Geoff Smith "to wind up all mining operations and dispose of all equipment remaining at the mine and finalise all outstanding obligations in connection with mining operations" by late January. The Chinese company, majority owned by the Chinese government as its international investment vehicle, was told that its rights were being revoked and that "all mine facilities must be removed and site remediation carried out at (Chinese) cost".

The letter warned that "Mineralogy requires that the land be rehabilitated to the condition it was in prior to entry into the above agreement and prior to any work being undertaken by (Citic Pacific)".

The demands have infuriated Chinese executives who have been backed by court findings in rejecting Mr Palmer's repeated demands for hundreds of millions of dollars in royalty payments.

Senior sources said federal ministers and West Australian Premier Colin Barnett had been briefed about the conduct of the leader of the Palmer United Party in his disputes with Citic Pacific, which has paid him $US415 million so far to mine iron ore from Pilbara tenements. The first shipment from the port of Cape Preston is imminent with a Chinese vessel taking on 40,000 tonnes of iron ore concentrate this week.

The head of Citic Pacific has accused Mr Palmer of "obstructive legal behaviour" and warned: "It's our view that (his) behaviour and Mineralogy's litigious approach will be closely examined by the wider community."

Mr Palmer's November 22 letter to Citic Pacific purporting to revoke the company's rights to mine and ship the iron ore came five days before The Australian Financial Review published an interview in which he said he was "considering" such action.

According to other legal correspondence leaked to The Australian earlier this year, Mr Palmer warned the Chinese that the relationships between the two countries would be hurt if he were not paid as a matter of urgency.

Mr Palmer's assets in Queensland -- a dinosaur park on the Sunshine Coast and a nickel refinery in Townsville -- have been losing a total of tens of millions of dollars a year.

He did not respond to questions yesterday.