Citic Pacific criticizes Palmer in Australian iron ore dispute
March 6, 2014 Category Automotive Metals & Minerals, Minerals
Citic Pacific took a public swipe at Australian billionaire Clive Palmer over his attempts to halt its long-delayed and massively over-budget USD8 billion iron ore project in Australia. The Sino Iron project, China’s biggest offshore mining investment, was to be a key element in Beijing’s strategy to ease its dependence on iron ore producers Vale, Rio Tinto and BHP Billiton. But instead it has been a disaster for Citic Pacific and its contractor, Metallurgical Corp of China (MCC), as they ran into regulatory hurdles, labor shortages, disputes over hiring Chinese workers, safety issues and soaring costs. Palmer, who sold the rights to the ore to Citic Pacific, has sued the company for what he says are hundreds of millions of dollars owed in royalties and tried to block Citic’s port access. “Any claim that we haven’t paid our fair share in accordance with agreements is just plain rubbish,” Citic Pacific President Zhang Jijing told mining industry executives, bankers and lawyers in Melbourne. He said commercial disputes were not unusual and Citic Pacific always preferred them to be sorted out away from the public spotlight, but that was an “unrealistic expectation” with “some larger-than-life characters involved”. The current dispute between Palmer and Citic Pacific is over a royalty stream potentially involving around AUD200 million. Zhang said the industry benchmarks under which it was to be calculated no longer existed, so the method of calculation needed to be resolved. “The proposition is Citic wants to come here and suggest the main consideration can’t be calculated, yet they still want to take our resources back to China without paying for them,” Palmer’s company Mineralogy retorted. Palmer also accused the Chinese company of having “occupied the port and shipped Australian resources to China without paying full consideration”. Citic Group Chairman Chang Zhenming warned investors to be patient for returns on the project in a six-page letter to shareholders. “We ask for your patience. No pain, no gain,” he wrote. What Chang made abundantly clear is that shareholders may have to endure years of losses before the iron ore mining and processing project in Western Australia will turn a profit.
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