AusRAIL, Market Sectors

Murchison downplays Oakajee blowout

Murchison Metals says media claims of cost blowouts for the Oakajee Port and Rail (OPR) project will remain speculative until completion of a bankable feasibility study (BFS), due by the end of June.

Leaked confidential documents from OPR project partners Mitsubishi and external consultants predict a total cost increase from March 2010’s estimate of $4.4bn to $6.7bn, The Australian reported.

However, Murchison last week said in a statement that cost increases are affecting projects across the board in West Australia and it is therefore likely there will be some capital increase from project cost estimates contained in OPR’s draft BFS report, released in March last year.

In fact, a joint venture study in the ongoing BFS process dating from November 2010 predicted a capital cost of $5.23bn.

In 2008 the Federal and Western Australian Governments committed $678m in funds to build the port’s common user facilities. The Australian claimed the confidential documents estimate this figure has grown to $930m.

Western Australian premier Colin Premier Barnett has ruled out any increase in public funding. As it stands, the exceptional injection of revenue has already inextricably tied him to the project’s successful completion.

Barnett appears keen for additional investors to back the project and admitted to The Australian that there does need to be a more formal involvement of China.

He said last week on Fairfax Radio, “I was told that the person in charge of the project was going to Beijing to talk about Oakajee”.

“In a couple of weeks’ time we have one of those senior Chinese government officials coming to Perth, and I suspect he may raise Oakajee,” he reportedly said.

Chinese metals giant Sinosteel, which is developing the $2bn Weld Range project in WA’s Mid-West iron ore region, told The Australian that any potential cost blowout at OPR “absolutely concerns us” because it is the miner’s will pay the “ultimate price” through increased tariffs.

Other miners with projects in the mid west region include Sinosteel MidWest, Gindalbie Metals, Atlas Iron, Crosslands Resources and Mt Gibson Iron.

Barnett has championed the speedy development of the new iron ore province in the state’s Mid-West region. Time is of the essence if the area is not to miss out on the best of the mining boom. OPR’s proposed 45mtpa deepwater port is essential to realise the export potential of junior projects currently developing in the region.

Oakajee will operate under the jurisdiction of the Geraldton Port Authority. Oakajee is located about 20 kms north of Geradton, and will be connected by rail networks to the mines, situated several hundred kilometres to the north east and south east.

Includes information sourced from The Australian Journal of Mining: