UPDATE 12pm: The troubled billion-dollar Oakajee port and rail project has been all but sunk after one of the Mid West iron ore hopefuls lined up as foundation customer for the infrastructure pulled the plug on its mine development.
Sinosteel Midwest, which acquired the Weld Range mine through its $1.4 billion top-of-the-cycle takeover of Midwest Corp in late 2008, is understood to have decided to shelve its mine development indefinitely because of Oakajee's delayed construction.
It strips the proponents of the Oakajee Port and Rail venture, Murchison Metals and Mitsubishi Corp, of arguably its most important customer and further adds to viability doubts hanging over the controversial venture.
It remains unclear whether OPR can prove it is viable without Weld Range.
Murchison called a trading halt on its shares at 11.35am to give it time to consider the news and respond to the market.
Meanwhile, another foundation customer of Oakajee, Gindalbie Metals, said the port and rail project was essential for the company to lift production from its Karara iron ore project beyond 16 million tonnes per annum.
“We continue to support the development of Oakajee and continue to be engaged in constructive negotiations with all parties involved,” Gindalbie’s managing director Tim Netscher said in a statement.
Sinosteel, which is regarded as China's biggest iron ore trader, had placed a $2 billion development cost on Weld Range. Weld Range was slated to produce 15 million tonnes of direct shipping iron ore annually for shipment through Oakajee.
Weld Range was one of three foundation customers for OPR's network, accounting for one-third of the port's start-up capacity of 45mtpa.
But it is understood that Sinosteel had become increasingly concerned at the lack of progress in Oakajee's development amid reports of massive cost blowouts for the port and rail infrastructure and the likelihood that OPR would need to charge its customers exorbitant tariffs.
Even before Sinosteel's withdrawal there were serious doubts within WA's mining industry about whether Oakajee would actually be developed.
Unlike Gindalbie Metals' Karara magnetite project, which can export its iron ore through Geraldton's port, Sinosteel was reliant on Oakajee to be built.
Sinosteel is understood to have told employees at Weld Range and in Geraldton this morning of its decision to mothball Weld Range.
There will be 43 job losses, not to mention that 850 Weld Range construction jobs that will not eventuate.