Oakajee port price to come down: CEO

15/01/2009 - 14:07

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The $4 billion price tag for the Oakajee port and rail project is expected to come down as the global economic downturn lowers the price of iron ore and mining project deferrals free up contractors.

Oakajee port price to come down: CEO

The $4 billion price tag for the Oakajee port and rail project is expected to come down as the global economic downturn lowers the price of iron ore and mining project deferrals free up contractors.

Christopher Eves, chief executive of Oakajee Port & Rail, the company behind the project, said it is an ideal time to construct infrastructure of this kind.

"The project will be able to take advantage of cost reductions in construction which has arisen as a result from the downturn internationally and we're seeing much more competitive pricing," Mr Eves told WA Business News.

"We're a buyer of steel and the price of steel is coming down of course as the price of iron ore is, so some people have suggested that this is an ideal time to construct infrastructure of this kind which is so capital intensive.

Mr Eves said the size of any cost reductions has yet to be finalised. The estimated price tag for the port is pegged at $1.6 billion while the rail line is projected to cost between $2.2 billion and $3 billion. The overall cost of the project is between $3.8 billion and $4 billion.

"We find that prices are becoming far more competitive and we're putting together tender packages and putting those out for competitive tender as we're obliged to do, and we're finding a lot more interest from suppliers and contractors," he said.

"There isn't the competition for suppliers and contractors as there was with all the mining projects that were going on."

"There is now excess capacity in the construction industry due to mining projects being deferred or delayed and we intend to take full advantage of that."

He said the federal government's final list of projects to receive funding from the Infrastructure Australia Fund, due out in March, is not expected to delay the start of project construction, which at this point is not critical.

Last year, the state government made a submission to the $12.5 billion fund, nominating five Western Australian projects including the Oakajee port and rail operation.

In a draft list released last month, the federal government included all five projects as consideration for funding.

Mr Barnett has previously said he would wait until the final funding list is released to finalise the development agreement between the government and OPR, which had been pushed back from November to February this year.

Mr Eves said that aside from the funding arrangements, the critical aspect is determining the exact route of a 500 kilometre rail line, which will service the miners in the Mid West region.

He said he could not give a timeframe for finalisation of the rail route, saying changes in the government's handling of the project could affect the project timeline.

The project was originally managed by the Department of Planning and Infrastructure, but is now being moved to the new portfolio of State Development, which is being looked after by Mr Barnett.

Mr Eves said that until the State Development agency is properly staffed, it could not pick up from the DPI.

"In the mean time, DPI are still running hard with it and are still advancing their consideration of the rail line and everyone is hoping it will be nominated in a timely way," he said.

OPR is a joint venture between Mid West miner Murchison Metals and Japan's Mitsubishi.

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