News

CITIC Pacific Mining will reduce annual production at the Sino Iron magnetite project due to physical space constraints.

Production of Cape Preston Concentrate will reduce from more than 21 million wet metric tonnes (wmt) in 2023 to approximately 14 million wmt for the 2024 calendar year.

CITIC entities have also commenced legal action against tenement holder Mineralogy, aimed at compelling Mineralogy to submit to the State proposals to enable operations to continue for an interim period and a return to 2023 production levels.

Reduced production

After more than 10 years of production, Sino Iron’s mine pit has become constrained after reaching the boundary of the current approved mine pit footprint. As a result, mining at the existing annualised rate is no longer possible.

As the mine pit gets deeper, the pit floor becomes smaller, restricting the area over which drilling, blasting, mining, water management and blending activities are conducted. The existing waste rock dumps and tailings storage facility are also approaching capacity, due to similar approved footprint constraints.

The project's State Agreement mandates that the project proposals required to increase Sino Iron’s operating footprint must be submitted by Clive Palmer-controlled Mineralogy. Mineralogy has refused to cooperate in the submission of critical life-of-mine proposals for many years.

Sino Iron’s most recent approved project proposals were approved more than 14 years ago. Those project proposals were based upon a mine plan for only the first five years of operation. Those same proposals, which were jointly submitted by Mineralogy, said that during the first five years “additional areas will be sought for the placement of tailings and waste rock, as well as extension of the pit area and volume.”

CITIC has repeatedly warned that, without the approval of new project proposals, Sino Iron will run out of space and be forced to suspend operations.

New legal action launched to progress urgently required interim project proposals

In 2018, CITIC commenced legal proceedings, seeking a court order to compel Mineralogy to submit project proposals, which would have allowed for life-of-mine operations for the 2 billion tonne mining rights sold to CITIC by Mineralogy and Mr Palmer. Justice Kenneth Martin of Supreme Court of Western Australia handed down his judgment last year. Both sides have appealed aspects of the judgment, and those appeals have been listed to be heard in August 2024.

Separate to the appeals, in 2023 CITIC prepared and provided a set of interim project proposals (the 2023 Mine Continuation Proposals) to Mineralogy which, if approved, would allow already approved activities of mine pit development and waste and tailings storage to extend into land already made available to the CITIC entities by Mineralogy under existing agreements between the parties.

Approval of the 2023 Mine Continuation Proposals would support Sino Iron’s continuity over the medium term, while a comprehensive solution is sought for the balance of the project's long life. Mineralogy has also refused to submit these interim proposals.

Given the urgency of the situation, the CITIC entities have launched a new legal proceeding in the Supreme Court of Western Australia, seeking orders to compel Mineralogy to submit the interim proposals to the State for approval. The CITIC entities will also seek an expedited hearing of that proceeding. Mineralogy seeks a stay of the new proceeding. The proceeding is listed for a directions hearing before Justice Cobby on 20 February 2024.

Economic benefits, payments to the State and Mineralogy

CITIC Pacific Mining invested more than US$12 billion in developing the Sino Iron project. Now among WA’s leading exporters, CITIC directly and indirectly employs 3000 people at Sino Iron – 97 per cent of whom are Australian residents.

Deloitte Access Economics estimate that over the 40-year life of the project, more than AU$51 billion will be spent on goods and services in Western Australia. Direct wage payments to local workers will total AU$8.7 billion.

For calendar year 2023, approximately AU$182 million has been or is payable in State royalties for the benefit of the WA community. This will bring CITIC’s total State royalty payments to over AU$924 million since Sino Iron started production more than a decade ago.

During the same period Mineralogy has received total royalty payments of AU$166 million (Royalty Component A) and US$1.857 billion (Royalty Component B), excluding GST. This is in addition to more than US$560 million CITIC paid to Mineralogy and Mr Palmer for the rights to mine, which now equate to 3 billion tonnes of magnetite ore, following completion of a further acquisition in late 2021.

Comment

CITIC Pacific Mining Chairman and Chief Executive Officer Chen Zeng said:

In 18 years, we’ve transformed a greenfield location into Australia’s biggest iron ore valueadding operation.

“Our mineral processing megaproject directly supports thousands of local jobs and businesses and is a massive contributor to the WA economy.

“Despite our company’s huge investment in a new industry for this State, we’re in a troubling situation where we cannot progress approvals to enable life-of-mine operations up to our current ore entitlements.

“In the short-term, we will do everything possible to protect and retain our workforce. However, there will be adverse impacts on some contracting activities, project expenditure, revenue, royalty payments and short to medium term project viability.

“Urgent resolution of these time-critical issues remains necessary to avoid further production reductions and project suspension. This should be the focus of all stakeholders. Having achieved so much at Sino Iron in recent years, suspension would be a devastating outcome on many levels.”

ENDS