Pilbara miner to slash production

Iron ore producer CITIC Pacific Mining plans to slash output by 33 per cent and flagged the possibility of suspending operations, blaming a legal standoff with Clive Palmer.

The Chinese company said it had run out of space because Mr Palmer’s company Mineralogy, which holds title over CITIC Pacific’s tenements, has refused to apply for an expanded mine footprint.

Production will reduce from 21 million wet metric tonnes (wmt) in 2023 to about 14 million wmt for the 2024 calendar year.

CITIC Pacific employs 3,000 people at its expansive Sino Iron magnetite project in the Pilbara.

Chairman and chief executive Chen Zeng said that, in the short-term, it would do everything possible to protect and retain its workforce.

“However, there will be adverse impacts on some contracting activities, project expenditure, revenue, royalty payments and short to medium term project viability,” he said.

“Urgent resolution of these time-critical issues remains necessary to avoid further production reductions and project suspension.

“This should be the focus of all stakeholders.

“Having achieved so much at Sino Iron in recent years, suspension would be a devastating outcome on many levels.”

The Sino Iron project was developed by CITIC Pacific at a cost of more than $US12 billion after the company bought mining rights from Mr Palmer and Mineralogy.

It paid more than $US560 million up-front and has paid a further $US2 billion in royalties to the Queensland tycoon. Despite that, it has had a fractious relationship with Mr Palmer, including multiple legal battles.

The project's state agreement mandates that project proposals required to increase its operating footprint must be submitted by Mineralogy.

CITIC said Mineralogy has refused to cooperate in the submission of these critical life-of-mine proposals for many years.

Sino Iron’s most recent project proposals were approved 14 years ago.

Those project proposals were based upon a mine plan for only the first five years of operation.

CITIC said that after more than 10 years of production, its mine pit has become constrained after reaching the boundary of the current approved footprint.

As a result, mining at the existing annualised rate is no longer possible.

CITIC explained that, as the mine pit gets deeper, the pit floor becomes smaller, restricting the area over which drilling, blasting, mining, water management and blending activities are conducted.

It added that the existing waste rock dumps and tailings storage facility are also approaching capacity, due to similar approved footprint constraints.

CITIC said it has repeatedly warned that, without the approval of new project proposals, Sino Iron would run out of space and be forced to suspend operations.

In 2018, CITIC commenced legal proceedings, seeking a court order to compel Mineralogy to submit project proposals.

It has appealed a judgement handed down last year.

Separately, in 2023, CITIC submitted a set of interim project proposals to Mineralogy which, if approved, would allow access to additional land.

CITIC said approval of this proposal would support Sino Iron’s continuity over the medium term, while a comprehensive solution is sought for the balance of the project's long life.

Mineralogy has refused to submit these interim proposals.

As a result, CITIC has launched a new legal proceeding in the Supreme Court of Western Australia, seeking orders to compel Mineralogy to submit the interim proposals to the state for approval.