PERTH (miningweekly.com) – The future of the A$15.8-billion Sino iron project, in Western Australia, could be in jeopardy as the approval of the mine continuation proposal is delayed.
China-owned Citic Pacific Mining has said the expansion, which will ensure sufficient space for waste, tailings and stockpile facilities, is critical. However, the plan has to be signed off by Clive Palmer’s Mineralogy.
Mineralogy’s approval of the expansion plan is a requirement under the project’s state agreement.
The two partners squared off in court this week over a royalty agreement feud. In closing statements in the Supreme Court of Western Australia, council for Citic Pacific said that without the approval of the mine continuation proposal, operations at the Sino project will “become severely constrained within 2017”.
Additional tailings capacity will take about three years to install and will have to be completed by mid-2020, when the final lift of the existing tailings storage facility is completed.
Citic Pacific in April shelved capital expenditure plans at the Sino project, designed to extend the mine life and assist in ramping-up production capacity to the struggling project’s 24-million-tonne-a-year nameplate capacity, amid continuing legal battles between the Chinese firm and Mineralogy.
The legal battles pertained to royalty payments at the Sino project, with the royalty originally based on the annual benchmark iron-ore price. However, this system was scrapped in 2010, and since then Mineralogy has argued that the new royalty should be based on a formula linked to various spot price indexes.
Citic Pacific, in turn, is arguing for a 20% share of future profits for Mineralogy.
To date, the Sino project has struggled to achieve profitability as iron-ore prices have tumbled, and owing to the high cost of production at the operation.