Tensions between Clive Palmer and his Chinese partners in the Pilbara have boiled over, with CITIC Pacific heading to WA's Supreme Court yesterday to try to block a move by the mining magnate to terminate a mining lease at the Sino Iron magnetite project.
The $US8 billion ($7.6 billion) project completed commissioning of the first of six production circuits this week and CITIC yesterday said it was on track for its first exports by early next year.
But the long-awaited milestone has been overshadowed by a dispute between CITIC and Mr Palmer, who owns the underlying tenements on which CITIC operates.
The simmering dispute has spilt into the open, with CITIC seeking an injunction against Mr Palmer's company Mineralogy to prevent it cancelling CITIC's mining rights over the project.
CITIC has already paid more than $US400 million to Mr Palmer for the right to mine two billion tonnes of ore at Sino Iron and the billionaire has said he could also be paid as much as $US500 million a year under a royalty regime covering both extraction and production.
Mr Palmer told WestBusiness last night the dispute related to extraction royalties payable by CITIC.
"We have a standard right-to-mine agreement," he said. "In the agreement it says they pay a royalty when ore is taken. We would say that word 'taken' means when you mine it - they would say it means when you take it from Australia."
Mr Palmer said the royalty applied only to ore destined for Sino's processing plants, not waste ore, and a separate royalty was payable on the magnetite concentrate after it had been processed.
It is understood Mr Palmer is claiming royalties on the ore already moved by CITIC, about seven to 10mt.
"It's not a lot of money, but we're taking action to get a determination because it's a 30-year project and you don't want to constantly have disagreements," he said.
WestBusiness believes CITIC's Supreme Court application was not triggered by the dispute over the terminology but by a separate notice from Mineralogy "purporting to terminate the mining right and site lease agreements".
It is understood that notice infuriated CITIC's Chinese management, with the company prepared to risk a permanent breakdown in the joint venture relationship to protect its local investment.
The dispute is set to have its first outing in court later this week.