Steel giant puts Oakajee in limbo

Cameron BartramCountryman
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The $6 billion Oakajee port and rail project in the Murchison was dealt a blow late last week when Chinese metals giant Sinosteel placed its $2 billion Weld Range iron ore project on hold after finally losing patience with Oakajee’s cost blow outs and delays.

The Oakajee port and rail infrastructure project is being constructed by Japan’s Mitsubishi Corp in conjunction with Murchison Metals (ASX:MMX), with the networks three foundation customers flagged as Gindalbie (ASX:GBG) and Ansteel’s Karara project, Murchison Metals Jack Hills development and Sinosteel’s Weld Range project.

The timing of Sinosteel’s decision is disappointing not only for the Geraldton community — 43 jobs will be lost from the local office — but also for Murchison Metals, which is expected to deliver a bankable feasibility study on the infrastructure project by the end of June.

Murchison Metals went into a trading halt on Thursday pending an announcement of the feasibility study, and the market is waiting with baited breath for the results.

According to Sinosteel, the completion date of the Oakajee port and rail development has already been pushed out from 2012 to a forecast not before the end of 2015.

The Oakajee port and rail infrastructure project is the key to making the Murchison WA’s next iron ore province, with the development of 570km of rail designed to haul 45 million tonnes of iron ore in the first year, and expand to up to 100 million tonnes.

A total of 17 iron ore parties have been identified as potential customers for the Oakajee project, and this news sent a shockwave through several iron ore explorers in the Mid West.

In addition to those companies already mentioned, other prospective customers include (in alphabetical order): Atlas Iron (AGO), Athena Resources (AHN), Emergent Resources (EMG), Mt Gibson Iron (MGX), Royal Resources (ROY) and Venus Minerals (VMS).

This latest news comes on the back of a tough six months for iron ore explorers with share prices fading since their January highs as opinion creeps into the market that there will be a glut of iron ore on the market from 2014 if the expected development projects come online on time.

Those companies not already in production are being viewed as being behind the curve as existing producers take advantage of the current high iron ore prices.

Iron ore will still continue to be exported from the region through the Port of Geraldton, however, the region needs the Oakajee port and rail project to go ahead if it is to be regarded as the second major iron ore producing province in WA.

Information contained in this article does not consider your personal circumstances. You should consult a stockbroking professional before making any investment decisions. Sentinel may hold positions in stocks discussed from time to time.

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