Murchison Metals, the company primarily responsible for the Oakajee Port and Rail project has admitted to difficulties in funding its share of the development after a key customer placed its mid-west operations on hold.

The development's future is now doubt after the Chinese company Sinosteel pulled out of a $2 billion project when it grew exasperated with Oakajee's cost blowouts and delays. Sinosteel said last Thursday it was shutting down the Weld Range iron ore project because of development delays in the Oakajee deepwater port and rail lines.

The company wants a revised tariff structure and consistent schedule on when the infrastructure will be delivered before resuming the project. The delays in the Oakajee project had already cost Sinosteel $100 million a year and the completion date has been pushed to 2015 instead of the initial projected 2012 completion.

In a statement issued Monday, Murchison said that "The fact that to date it has not been possible to reach common ground with the proposed foundation customers on tariffs and other commercial terms of the supply chain agreements remains a significant hurdle to the development of the projects, and a point of further negotiation."

The Oakajee Project is a $4 billion port and rail project in Western Australia's mid-west that is meant to connect mines in the region to the new port in Oakajee via railway. This new development could seriously impact the project's completion. Murchison Metals has said that its failure to negotiate supply agreements is a significant hurdle to the future of the development. Finding the funds for its 50 per cent share of the projects has required the company to look for other interested Chinese parties.

Mitsubishi owns the other 50 per cent of the Oakajee development. It has been reported that the Japanese company also intends to pull out of the deal due to huge cost blowouts. The estimated capital costs had blown out by $1 billion.

Murchison today suspended trading on the Australia Securities Exchange, according to ABC News. The results of two feasibility studies on the project will be released next week as part of the company's market update