Citic Pacific Frustrated over Australian Mine Bill

Hong Kong-based holding company, CITIC Pacific Ltd., expressed disappointment that Australia included magnetite iron ore in the list of minerals contained in its proposed minerals resource rent tax (MRRT).

The MRRT secured the approval of the Australian Lower Chamber of Parliament on Wednesday, and will now move on to the Senate where a debate is expected in 2012. When approved, the MRRT is expected to infuse some $11 billion to the national treasury.

"It is against the national interest to discourage investment in magnetite mining, which is an emerging, value-adding industry," Libby Lyons, spokeswoman of Citic's local subsidiary Citic Pacific Mining, said in The Wall Street Journal.

Magnetite iron ore is a low-grade variety deposit that needs processing before it can be sold. Magnetite iron ore producers had hoped it would be excluded from the tax because of its production costs. The process involves crushing the mined ore to a fine powder and mixing it with water to create slurry, afterwhich it will be piped to the new Cape Preston port which includes a desalination plant.

Citic's A$5.2 billion Sino Iron project, which had been stalled 18 months later than the original schedule, aims to produce at least 6 million tonnes a year of magnetite pellets from mid-2012. It is the largest magnetite iron ore project in the world and is also the world's first large scale production line employing advanced technology to process magnetite iron ore.

At full capacity, the mine is expected to deliver 25 million tonnes per annum to China steel mills over an estimated 25-year lifespan.

Australia is the world's largest iron ore exporter, accounting for 40 per cent of all iron ore traded globally by sea. China is its biggest importer.

Under the new MRRT, Australia's 40 per cent petroleum resource rent tax now applies to all projects, including the developing coal-seam gas industry, effective July 2012. Previously, it only applied to offshore developments.