Aquila shelves $7b iron ore project
AQUILA RESOURCES will put its $7.4 billion West Pilbara iron project on hold for at least the rest of the financial year after failing to resolve a funding dispute with its investment partners.
Shares in Aquila, 14 per cent owned by Chinese steelmaker Baoshan Iron & Steel, fell as much as 10 per cent on Monday before closing 12¢, or 3.8 per cent, lower at $3.
The dispute, between Aquila and its partners AMCI, a mining investment house, and South Korean steel group Posco, began when they effectively froze the project in September when iron ore prices plunged to their lowest levels since the financial crisis, rendering the project unprofitable at the time.
Iron ore prices have since rebounded strongly, but the dispute was sent into arbitration.
Arbitration was due to begin on February 18, but Aquila said on Monday it would continue the suspension for the rest of this financial year.
"Aquila will continue to focus its efforts on how best to progress the project," chairman Tony Poli, who owns 29 per cent of the company, said in a statement to the stock exchange.
Aquila had won environmental approval just three days earlier to develop the key Anketell Port. But the West Australian government has said it will not approve construction of the port until it is certain the project has enough funds to go ahead.
Aquila has been selling "non-core" assets to build up funding for the West Pilbara project, but a run-up in costs is expected to see its contribution run into the billions.
Morningstar Resources analyst Gareth James said he had always been doubtful about the project proceeding following a $1.4 billion capital cost blowout in October.
He said production remained years away, with no revenue stream for the company in the interim.
"Even if they did resolve the budget dispute with the joint venture partner, even if they did find the billions of dollars required to fund the project, you then have the massive risk of development, during which time costs could blow out further," Mr James said.
"We're of the view that this project is very unlikely to happen."
The West Pilbara joint venture, which plans to export 30 million tonnes of iron ore a year, is 50 per cent owned by Aquila, 25.5 per cent by AMCI and 24.5 per cent by Posco.
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