Iron project safe from Citic's $3bn loss

The development of Citic Pacific's $6 billion Sino Iron project in Western Australia is not expected to be impacted by the company's near $3 billion loss on the Australian currency, a spokesperson said.

The Hong Kong-listed company is currently under investigation by local regulators after it revealed earlier this week that unauthorised foreign exchange trades had cost it $HK807.7 million.

If the trades are at current mark to market values, the loss could extend to $HK14.7 billion ($A2.85 billion) from outstanding contracts held in Australian dollars and Euros against the US dollar.

The Australian dollar has fallen sharply from its July highs against the US dollar, and the losses could rise or fall depending on the US dollar's performance.

Citic Pacific said it had entered into the various leveraged foreign exchange contracts with a "view to minimising currency exposure" of the Sino Iron project.

News of the massive loss has caused the company's share price to slump to a reported 10-year low and dragged the Hong Kong's benchmark Hang Seng Index to a three-year low yesterday.

A Citic spokesperson told WA Business News that the loss is not expected to impact the iron ore project, with 75 per cent of capital expenditure already committed to the project.

She added that Citic Pacific had in place "contingencies" with its 29 per cent shareholder, China's Citic Group.

The contingency allow Citic Pacific to access a $US1.5 billion standby loan facility.

The project has a 2 billion tonne magnetite iron ore resources, bought from billionaire Clive Palmer's Mineralogy company.

Included in the project is the construction of port facilities at Cape Preston and a 450 megawatt power station.

The company is currently waiting on an updated state agreement for the project, which was delayed following the change in government.