encouraging

Some encouraging information from an article in today’s West Australian…

http://www.thewest.com.au/default.aspx?MenuID=32

China backing for Yilgarn tipped for nod
12th January 2008, 12:00 WST

Federal Treasurer Wayne Swan is expected to approve within days a $375 million equity injection by five Chinese government-backed groups into Yilgarn Infrastructure, the proponent of an ambitious railway and Oakajee port project in the Mid-West.

Mr Swan�s approval, following a recommendation from the Foreign Investment Review Board, is likely to be his first approval of a major foreign investment in Australia since the election of the Rudd Labor Government in November.

It is also likely to herald the biggest single investment in an Australian company by Chinese entities backed by the government in Beijing, and could set a precedent for future applications by Chinese groups to invest in Australia�s booming resources sector.

Yilgarn, which has been eagerly anticipating word from Mr Swan, refused to comment last night. However, it is understood an announcement is imminent.

The approval would be a significant step forward for Yilgarn�s ambitious proposal to build a railway linking various Mid-West iron ore hopefuls with a new port at Oakajee.

Yilgarn has placed a price tag of about $3 billion on the infrastructure construction costs and expects to source 75 per cent of the funds from debt facilities arranged by its Chinese backers, including China Overseas Engineering Corp and China Railway Materials Construction Corp.

The remaining amount, about $750 million, is to be raised through an initial public offering, with Yilgarn�s Chinese backers committed to covering half of the IPO amount.

Yilgarn�s other key pre-float investor is WA Local Government Superannuation Plan.

However, despite the support of its Chinese backers, Yilgarn still needs the support of the WA Government before it can push ahead with its railto-Oakajee plan.

State Planning and Infrastructure Minister Alannah MacTiernan expects to decide by late this year whether to award the Oakajee tender to Yilgarn or Murchison Metals, which is proposing its own infrastructure plan backed by Japanese trading giant Mitsubishi.

Ms MacTiernan has already complained that the Mid-West�s iron ore proponents had insufficient mineral resources to justify the Oakajee expenditure, which is why the port tender process has not happened sooner.

The miners have denied her claims, pointing to their aggressive drilling programs which they say will provide significant resource boosts within the next few months.

Yilgarn, which unlike Murchison is reliant on third-party ore to make its infrastructure proposal work, has also pointed to the deep pockets of its backers and the fact that its Chinese partners were willing to accept more investment risk than traditional lenders.

PETER KLINGER