China has stopped evaluating new investments in Australia until some of its existing projects deliver better returns, according to Gindalbie Metals chairman George Jones.
China has stopped evaluating new investments in Australia until some of its existing projects deliver better returns, according to Gindalbie Metals chairman George Jones.
Speaking at the opening of the $2.57 billion Karara iron ore project, Mr Jones said China would be closely watching the performance of Karara and the Sino Iron project in the Pilbara.
“China is very disappointed in the amount of money they have invested in iron ore in Australia, and the amount of production that has flowed to China from it,” Mr Jones told journalists.
“So they have stopped consideration of new projects until some of them start working, and this is the first cab off the rank, so this is quite significant for everybody else as well.”
Karara and Sino Iron are the first magnetite projects in Western Australia, and both have been backed by Chinese enterprises.
Mr Jonesalso said he was very concerned about costs in the mining sector, saying the industry had become complacent and that “capital and operating costs are out of control”.
His comments came one day after another company he chairs, Sundance Resources, terminated its $1.3 billion merger agreement with private Chinese company Hanlong Mining.
Sundance is one of several companies looking to develop big iron ore projects in western Africa, which has been touted as a more attractive destination than Australia.
Mr Jones said the commissioning of Karara marked the realisation of a long-held dream to establish downstream processing and value-adding opportunities for the Australian iron ore industry.
Despite his concerns over costs and Chinese investment, Mr Jones said he hoped a decision would be made on the stage 2 expansion of Karara by the end of this year.
Stage 2 will double production of magnetite concentrate to 16 million tonnes per annum. It is designed to utilise power and transport infrastructure that has already been established, and is expected to cost between $1.5 billion and $2 billion.
“The numbers are compelling,” Mr Jones said.
“What we have to do is get this plant operating at its optimum and debottleneck it; I’m hopeful that with some tweaks we can get more than 8 million tonnes out of this.
“Until we know what the optimum production is, it’s hard to finalise the design of the next phase.”
Looking further ahead, Mr Jones said the next major project likely to proceed in the Mid West was Asia Iron’s 10mtpa Extension Hill development, also backed by Chinese interests.
All of these projects plan to use Geraldton port, but any expansion beyond that would need additional capacity at the new port planned for Oakajee.
“I would say in the next seven or eight years we will need Oakajee built; it will take about four years to build it so we need to get a move on and put it all together now.”
Premier Colin Barnett used the official opening of Karara to announce a royalty rebate to support magnetite developments in WA.
He told journalists that Karara would pay about $30 million in royalties during its first year of production.
Under the new policy, the project will qualify for a 50 per cent rebate during its first year of operation.
Mr Barnett also said the Karara project was the first piece of the jigsaw for the Oakajee project.
“Those who are sceptical about Oakajee should come here and look at the Karara project and see what can be done and the scale of what will happen in the future,” he said.
