From a report by Nick Evans
Chinese infrastructure company China Metallurgical Group Corporation (MCC), owner of the Ramu nickel mine in Papua New Guinea, is having serious problems at the CITIC Pacific Sino Iron magnetite project in the Pilbera region of Australia, which has links with controversial mining magnate Clive Palmer. The project has been plagued by cost overruns and delays.
MCC has been responsible for the design and construction of Sino Iron, which is reportedly more than $2.5 billion over budget and two years behind schedule. The the problems have reportedly put a serious dent in MCC’s reputation in China and internationally.
CITIC’s tenements are owned by Mineralogy, the company that will pay royalties to Mr Palmer when it gets the mine into production late this year. But the links between Mr Palmer and MCC run much deeper.
MCC is also involved in Australasian Resources’s Balmoral South project which sits between Sino Iron and the tenements Mr Palmer failed to float on the Hong Kong Stock exchange through Resourcehouse Ltd last year. Resourcehouse was seeking a $3.4 billion listing, but pulled its plans in June after the crisis in Europe sent jitters through financial markets.
Australasian Resources, which is 68 per cent owned by Mr Palmer, said late on Friday that two major ratings agencies had agreed to assess the company’s credit worthiness ahead of a planned $500 million high-yield bond issue to part-fund its Pilbara iron ore mine.
The ratings assessment, by Moody’s Investor Services and Fitch Australia, will be an important test of whether Australasian Resources can get the project off the ground.
The company, which has a market capitalisation of only about $90 million, wants to export 12 million tonnes of magnetite iron ore concentrate from its Balmoral South project, and has said it expected to be able to begin construction of its mine sometime this year.
But the company needs to raise $3.3 billion, not an easy task in the present capital markets, particularly as interest has waned in Australian magnetite projects in the past year.
Australasian says the $500 million bond issue will be backed by the Royal Bank of Scotland, with the rest of the funding to be arranged by way of export credit from Chinese banks.
According to a deal signed last year, MCC, in return, will be appointed as the engineering, construction and procurement contractor for Balmoral South.
It’s a curious deal for MCC, which effectively appears to be arranging itself work by finding the debt funding for Australasian.
Read more about MCC and Clive Palmer:
http://ramumine.wordpress.com/2011/05/19/clive-palmer-mcc-and-papua-new-guinea/
