CITIC scraps power station contract

CITIC Pacific Mining has formally confirmed long rumoured problems at its Sino Iron project in the Pilbara, sacking its power station contractor Austrian Energy and Environment.

Austrian Energy and Environment is the contractor responsible for building the power station at the Sino Iron project but CITIC Pacific alleges the contractor has failed to meet its material obligations.

The project is already running over time and over budget.

The original $US3.5 billion budget has twice been increased.

Today about 250 construction workers were locked out of the power station construction site after the contract was terminated.

In a statement, CITIC Pacific said its subsidiary Sino Iron Pty Ltd's decision to end the contract was not taken lightly.

The company said it followed a lengthy period of negotiations with Austrian Energy and Environment.

"Sino Iron has at all times acted in good faith in attempting to resolve the issues with AE&E," the statement said.

Neither, CITIC Pacific or Sino Iron believes the ending of the contract will affect the progress of the project.

"CPM is putting in place arrangements for completing the balance of works on the power station," CITIC said.

One of the contract workers, Steve, said the decision has taken the contractors by surprise.

"We all live in a camp just two hours out of Karratha. We've gone in ready to get on the buses and we've been told they've locked the gates on us because the company doesn't want us to turn up to work this morning," he told the ABC.

"We don't know where we stand at the moment, and neither does the company and there's other little small companies under the banner of AE and they don't know where they stand at this stage," he said.

See statement below:

CITIC Pacific Mining (CPM) announces that Sino Iron Pty Ltd has ended its contract with the Australian subsidiary of Austrian Energy and Environment (AE&E).
AE&E is the contractor responsible for building the power station at CPM's Sino Iron project.

CPM believes AE&E has failed to meet its material obligations under its contract with Sino Iron.

Sino Iron's decision to end the contract was not taken lightly and follows a lengthy period of negotiations with AE&E. Sino Iron has at all times acted in good faith in attempting to resolve the issues with AE&E.

Construction of the power station is nearing completion and preparation is being made for commissioning. CPM and Sino Iron do not believe the progress of the Sino Iron project will be affected by the ending of this contract.

CPM is putting in place arrangements for completing the balance of works on the power station. The future of existing sub-contractor employees is a major priority for CPM.

The Sino Iron project is the largest magnetite project under construction in Australia. Once completed, it will produce significant economic and social benefits for both Australia and China for decades to come.