Premier requests China to supply Oakajee

Murchison Metals has disclosed that the state government is requiring it to include Chinese suppliers in its $1.5 billion Oakajee port and rail infrastructure project.

This is the second major change to the project by Premier Colin Barnett, who announced last month that the state intends to co-invest in what had originally been planned as a private sector development.

Murchison partnered with Japanese company Mitsubishi Development to win a tender for the right to develop the Oakajee infrastructure, which is seen as critical to several iron ore projects in the Mid West.

The losing bidder was Yilgarn Infrastructure, which was backed by Midwest Corporation and a number of Chinese companies.

As a result, the tender was sometimes characterised as a competition between Japan Inc and China Inc - a perspective that was dismissed by the former state Labor government, which ran the tender.

The requirement for Chinese involvement was disclosed today by Oakajee Port & Rail, an infrastructure company jointly owned by Murchison and Mitsubishi.

Speaking at Murchison's annual meeting, OPR chief executive Chris Eves indicated OPR will meet the Premier's requirement for Chinese involvement in the project.

His presentation to shareholders indicated that Chinese suppliers to the project could be drawn from sectors such as construction, materials supply, rail car manufacture and even financing.

Speaking to WA Business News after the meeting Mr Eves said the Premier believes it is in the best interests of the infrastructure, and the best interests of the state, that those utilising the infrastructure be involved in the project from the ground up.

Although Mr Eves emphasised that each supplier that is chosen to work on the project will be done so based on merit, the government clearly wants involvement from China wherever possible.

"The Premier would like us to include Chinese businesses where we can," Mr Eves said.

"Whether it be Gindalbie or Midwest (Corporation)... the Premier would like to give them the opportunity to participate and generally be inclusive."

Meanwhile, Murchison said it is close to finalising an agreement with the state government for the development of the new deepwater port at Oakajee.

Murchison chairman, Paul Kopejtka said when the agreement is complete, OPR will move to finalise commercial arrangements with customers.

"Once the Development Agreement is finalised things move every quickly, with customers entering formal arrangements and suppliers locked in for what is a major project by any standard," Mr Kopejtka said.

"Our expectation is that some of these suppliers will be from China."

Mr Kopejtka also welcomed the government's decision to participate as an investor in the Oakajee port.

The long-awaited Oakajee port will assist the mid-west region's iron ore miners to export their product, as the nearby Geraldton Port has operated at full capacity for some time.

South Korean steel-making giant POSCO this week upped its stake in Murchison from 9.7 per cent to 12.26 per cent.

US hedge fund Harbinger Capital doubled its stake in Murchison in calendar 2008, up from 9.58 per cent in January to 19.98 per cent currently, making it the miner's largest shareholder.

Chinese steel-making giant Sinosteel Corporation, which has a 2.4 per cent stake in Murchison, got the nod from the federal government in September to buy up to a 49.9 per cent stake.

Murchison's shares today closed down 3.5 cents, or 6.19 per cent, to 53 cents.