Thursday, 08 November 2012 17:00
Mitsubishi has decided to "slow down" work to revive the stalled Oakajee port project in Western Australia's Mid West region after talks with potential joint venture partners languished.
The project came under the full ownership of the Japanese trading giant in February after its Crosslands iron-ore mining joint-venture partner, Murchison Metals, admitted it didn't have enough cash to fund the $6 billion development.
Oakajee was to export iron ore from the magnetite-rich Mid West, given the nearby Geraldton port is congested, but that part of the sector has fallen out of favour with a slide in iron ore prices and wavering Chinese demand.
John Langoulant, the CEO of Oakajee Port and Rail (OPR), which manages the project, said Mitsubishi's decision to "slow down" responded to current economic circumstances and the need for "prudent" spending.
"Our decision to reduce costs is not taken lightly," Mr Langoulant said.
"It's no secret that the current economic environment is creating challenges in the mining sector, with many WA companies and producers scrutinising their capital management."
Western Australian Premier Colin Barnett has for some time been trying to drum up Chinese investment in the project, while Mitsubishi itself has been unable to finalise talks with potential partners.
Mr Langoulant said funding discussions with potential partners had progressed in the past 18 months but the current external environment had made it difficult to complete negotiations.
Mitsubishi still had long-term confidence in the project, as well as an expansion of its now closed Jack Hills mine, he said.
It would continue to invest funds into studies for both projects while monitoring the economic environment closely, "with a view to ramping up once conditions improve and equity discussions progress to a satisfactory stage", Mr Langoulant said.
Before the downturn in the iron ore market, Mr Barnett described Oakajee, one of Australia's largest infrastructure projects, as the state's most important development for the next 50 years as it would open up a second major iron ore province, behind the Pilbara.
The "slow down" could mean job losses.
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