Chinese companies push for Oakajee shake-up Andrew Burrell From: The Australian March 04, 2011 12:00AM
CHINESE-BACKED companies in Western Australia's emerging Mid West iron ore province will hold talks in a bid to force a radical shake-up of the ownership of the $4.4 billion Oakajee port and rail project.
Sources close to the miners said yesterday that WA Premier Colin Barnett had sanctioned a restructuring of Oakajee Port & Rail and the miners would join forces to start negotiations over gaining equity in the project.
One possible result is that all the key players of the Mid West -- including Chinese giants Sinosteel and Ansteel, a key backer of Gindalbie Metals -- could acquire key stakes in OPR while those held by Murchison and Mitsubishi would be diluted.
"This will end up being a genuine Chinese-Australian-Japanese project," said one key player yesterday.
Chinese entities are the main investors in the Mid West mines and China will be the biggest market for the iron ore due to be exported from Oakajee from early 2015.
Related Coverage Oakajee may seek Chinese funds The Australian, 1 day ago Smooth shift in Lowy family The Australian, 1 day ago WA rail-port decision delayed Herald Sun, 1 day ago Barnett flags Oakajee ownership changes Perth Now, 1 day ago
Barnett grants Oakajee extension Perth Now, 2 days ago
Mr Barnett has given OPR -- a 50-50 joint venture between Perth-based Murchison Metals and Japan's Mitsubishi -- until the end of the year to commit to the project amid speculation that the capital cost has blown out to as much as $6.1bn.
The blowout is due mainly to the rapidly rising cost of steel and equipment since the last published estimate a year ago.
There are fears that the blowouts could drive up tariffs for mines intending to sign up as customers of OPR, which could make individual projects unviable and lead to the abandonment of Oakajee.
Sources said yesterday that an ownership shake-up would be critical in allowing the other Mid West mines to gain greater access to information on the cost of the project.
Mr Barnett said on Wednesday the viability of Oakajee could depend on major Chinese or other foreign companies with "big balance sheets" investing in OPR .
A spokesman for Murchison said the company would consider third-party investment in OPR on suitable commercial terms. Previously it had ruled out the need for any change in the ownership structure.
Murchison and Mitsubishi also own the Jack Hills mine, which is supposed to be OPR's biggest customer but has been subject to market speculation that it will not stack up financially.
Gindalbie Metals chairman George Jones said he aimed to get all the parties together to "thrash out a solution to this".
"I believe it does need fundamental structural change and hopefully we'll be able to work our way through that," he said.
"I believe that the structure of the rail and port has been specifically designed for one customer -- and that's themselves (Murchison and Mitsubishi).
"And they haven't really done enough to ensure the format fits everybody else."
Golden West Resources executive director John Lester said it was important that the ownership of OPR be decoupled from Jack Hills. "There is enough ore for Gindalbie, us and Sinosteel to make it viable today," he said. "That's the main point -- we are all being held up by Jack Hills and we don't think that's right."
Chinese companies push for Oakajee shake-up
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