THE WEST AUSTRALIAN
Friday, 01 February 2013 09:28
Contracting behemoth Metallurgical Corporation of China has unveiled the cost of its foray into WA, telling investors it is staring at losses of more than $2 billion from its local operations.
MCC said it would be forced to pump in another $US858 million ($825.6 million) to cover new blowouts at the CITIC Pacific-owned Sino Iron project, where it is the construction manager. The company revealed another round of cost blowouts at the troubled project, for the third year in succession, saying the completion costs could rise $US950 million to $US4.36 billion.
The Chinese contractor also revealed the extent of problems at its own Cape Lambert iron ore project, acquired from Tony Sage's Cape Lambert Resources for $422 million in 2009, slashing nearly 70 per cent from the book value of the asset.
In a statement ahead of the release of its 2012 full-year accounts, MCC said it would be forced to write off RMB2.3 billion ($355 million) from the value of the project. The assets were valued at $517.7 million in the 2011 financial report of subsidiary MCC Australia Holding (MCCAH), but MCC said its 2012 feasibility studies showed the prospects for commercial returns from mining the Pilbara deposit were "much lower than expected".
Blowouts at Sino Iron would force a $480 million charge to its 2012 accounts, MCC said.
The Chinese conglomerate also appears to have written off its chances of recovering other money pumped into its local arms, saying it would make provision for $370 million in bad debt from the Cape Lambert subsidiary.
MCCAH's 2011 accounts showed it owed more than $350 million to related parties, and made a $22 million loss for the year ending December 31.
Similarly, MCC said it would be forced to make provisions of more than $596 million for bad debts and the investment value in MCC WA, a subsidiary related to the CITIC Pacific construction job.
MCC said the bad debt impairments would not impact on its 2012 consolidated financial statements.
MCC and CITIC have been at loggerheads over construction costs and delays at the massive iron ore project, and CITIC hinted yesterday those disputes would not be resolved by the $US858 million MCC said it had kicked in "to drive the project forward".
In response, CITIC said an independent assessor would examine MCC's costs and "render an opinion on whether they were reasonable".
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