The West

Aquila down on cost blowout
The proposed Anketell port.

Aquila Resources shares lost more than one per cent after the company announced a $1.4 billion cost blowout for its contentious West Pilbara Iron Ore Project.

Additional capital and operating costs for the project have increased to $7.4 billion, up from $6 billion, leaving the minerals explorer to come up with at least $3.7 billion.

Aquila, which also focuses on coal and manganese, said the increase was primarily due to additional costs to comply with the WA Government’s Anketell Port Master plan and owners costs.

Analysts were expecting a blow-out following recent cost inflation in the sector.
It comes as doubts emerge about Aquila’s ability to move into iron ore as it develops proposals for two key mines in WA’s Pilbara.

Aquila owns 50 per cent of the The West Pilbara Iron Ore Project, an integrated mine, rail and port development, which is predicted to produce 30 million tonnes of new iron ore.

To date, more than $460 million has been spent on exploration, engineering, studies and the pursuit of state and Commonwealth approvals, including detailed design and technical work.

The company said no decision had been made about implementing recommendations which had been collected from more than 70 Australian and International entities.

The largest impact on operating costs has been a decision to outsource mining operations to a contract miner.

Morningstar Resources analyst Gareth James said the cost announcement was not surprising given the time that had elapsed since estimates were done.

"This project looks extremely unrealistic from our point of view,” Mr James said.
"It’s going to be a tough one for Aquila to complete."

Aquila would have to incur half the $7.4 billion in costs, he said.

He added that borrowing money from the Chinese had become more difficult and asset sales had not proceeded in line with market expectations.
Further cost blowouts could also be on the cards.

Shares closed down three cents, or 1.1 per cent, at $2.65.

The West Australian

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