Chinese company Citic has recorded a first-half loss at the Sino Iron magnetite mine in the Pilbara, while warning that the ongoing tussle with tenement holder, Clive Palmer’s Mineralogy, means production at the project could eventually be suspended.
Chinese company Citic has recorded a first-half loss at the Sino Iron magnetite mine in the Pilbara, while warning that the ongoing tussle with tenement holder, Clive Palmer’s Mineralogy, means production at the project could eventually be suspended.
The resources and energy arm of Citic, which includes Sino operator CITIC Pacific Mining, posted a loss of $46 million in the six months to June, although the exact contribution of the Western Australian project was undisclosed.
The $10 billion Sino Iron project started operation in 2013, with commissioning of all processing lines completed in July 2016.
Sino Iron operates differently from most other Pilbara iron ore operations, with the company processing magnetite ore at the mine rather than direct shipping.
Citic chairman Chang Zhenming said the company had produced 11 million tonnes of magnetite concentrate in calendar 2016 and was on track to hit 15mt in 2017.
But the relationship with Mineralogy, which owns the Sino Iron tenement, continues to cause problems, with Mr Zhenming saying there was a real risk that production would be suspended if issues were not resolved.
One problem would be that the company might run out of room to store waste in the near future.
He said it was Citic’s view that Mineralogy’s uncooperative and adversarial approach posed a threat to the future of Sino Iron.
“As a magnetite project, Sino Iron requires vast areas for the storage of waste and tailings generated by mining and processing activities,” Mr Zhenming said.
“For several years now, we have been seeking Mineralogy’s assistance to obtain the necessary government approvals required for the whole life of the project.
“However, Mineralogy’s refusal to cooperate means that we will run out of space for waste and tailings storage in the near future.
“This will severely constrain operations and impact Sino Iron’s sustainability.”
A related problem for Citic is created by the ongoing legal battle between the two entities regarding royalty payments.
Nonetheless, Mr Zhenming said that would not distract the company from its focus on reducing costs.
“Our ongoing legal disputes with Mineralogy have attracted much attention,” he said.
“We’ve tried not to let the litigation distract us from constructing the project, improving its operating efficiency and raising its overall reliability.
“It’s no secret that producing magnetite product is more expensive than direct shipping ore because it involves extensive processing.
“Therefore, driving down costs in all aspects of our operation is very important.
“In this regard, we have a continuous programme in place that has already reduced the overall costs of production.”
Overall, Citic recorded a 60 per cent increase in first-half profit, to $5.2 billion, with real estate and financial services the two best-performing wings of the partially state-owned conglomerate.
