PERTH (miningweekly.com) – Australian iron-ore producer Fortescue Metals will cooperate with a Chinese engineering group to double production at its Chichester Hub, in Western Australia.

The cooperation agreement with China Gezhouba Group Company, which was consistent with Fortescue’s position to continue with its Chichester expansion plans, despite the Australian government's proposed super profits tax (SPT), the company said on Friday.

The signing ceremony, which is set to take place on Monday, would reinforce its commitment to the completion of its Chichester Hub expansion from 55-million tons a year to 95-million tons a year.

Earlier this year, Fortescue reported that a A$15-billion expansion spend on its Solomon and Western Hub projects had been placed on-hold owing to the impact of the proposed resources tax.

However, the planned $4,5-billion investment into the development of the Chichester Hub would proceed, company CEO Andrew Forrest said at the time.

The expansion of the hub would proceed, as financing of the projects would be generated from internal cash flows to be provided from existing operations, over the next two-year, prior to the implementation of the SPT in 2012.

Fortescue executive director Russell Scrimshaw said on Friday that the “fundamental design flaws” of the SPT were restricting Fortescue from finalising agreements with any parties on the company's 260-million ton a year expansion projects.

These projects alone would have the capacity to increase Fortescue's production rate to 355-million ton a year, which is more than the existing iron-ore output from diversified giants BHP Billiton and Rio Tinto's Pilbara operations.

“We look forward to welcoming China Gezhouba Group Company as a Fortescue partner,” Scrimshaw said.

“It is most unfortunate that as a result of the resources super tax the Solomon and Western Hub projects remain on hold representing a lost opportunity to create investment and jobs.”

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