Chinese conglomerate Citic is set to write down the value of its Sino Iron project in Western Australia by as much as $2.2 billion due to plummeting iron ore prices which have sunk to a five-year low.
According to The Australian, the decision to write down the value of Sino Iron was made after the Chinese government-backed company took into account both current and forecast iron ore prices.
Sino Iron – China’s biggest investment in Australia – was expected to start shipping ore to Chinese steel mills in 2010 as part of Beijing’s strategy to ease dependence on iron ore giants Vale, Rio Tinto and BHP Billiton.
To date, Citic has poured about $10 billion in one of the mining boom’s most disastrous projects, which is about three times more than the project’s original budget.
The project has been delayed by a string of legal battles with entrepreneur and federal politician Clive Palmer and is still a long way from reaching its targeted capacity, even though it has begun production in late 2013.
Despite the delays, which Citic attributed to its own inexperience and that of its contractor Metallurgical Corp of China (MCC) in building a project of this scale outside China, the company stated that construction of the project’s final production lines will continue according to plan, with a target to have all six production lines operating by the end of 2016.