China Knowledge reported that CITIC Pacific Ltd the Hong Kong listed arm of China biggest state owned investment conglomerate, CITIC Group on January 3 inked a supplementary agreement to pay an extra USD 822 million to contractor Metallurgical Corp of China Ltd bringing the total costs of its Australian iron ore project to more than USD 6 billion.

CITIC Pacific said the third budget increase was due to full impact of foreign-exchange volatility and cost inflation for items including labor and equipment.

CITIC Pacific raised the same project cost by USD 835 million in May 2010 due to an iron ore price jump of nearly 140%, bringing total costs from USD 3.32 billion in 2006 to USD 4.2 billion. The total cost was increased to USD 5.2 billion and eventually more than USD 6 billion for the third time.

The additional payment was for MCC Mining a unit of MCC to complete the first two production lines and facilities for the whole six production lines.

CITIC Pacific said the first production line is expected to be completed by May 31 and put into operation by August 31 while the second production line would go into operation by December 31.

The iron ore project located in West Australia is estimated have a combined output capacity of 27.6 million tons of iron ore pellets and concentrates and the capacity is expected to exceed 70 million tons in future.

(Sourced from China Knowledge)