Australia's first Chinese run iron ore operation, CITIC Pacific's Sino Iron project south of Karratha has just got more expensive after its owner admitted to more project delays and flagged a potential AUD 900 million cost blowout.

First production from Sino Iron, which will be Australia's biggest magnetite mine and WA's first, is now slated for the first half of next year, compared to CITIC's last guidance in January of the latter part of this year.

At the same time CITIC said it was clearly disappointed with the performance of its engineering, procurement and construction contractor, China Metallurgical Group Corporation which it blamed for the latest delays.

CITIC said it was still evaluating a proposal by MCC of claiming another USD 900 million to reflect design and scope of work changes made by CITIC Pacific.

The MCC claim would bring Sino Iron's development cost to AUD 6.1 billion, compared to CITIC's original budget of AUD 3.5 billion.

CITIC had originally targeted the middle of 2010 for first production at Sino Iron, at Cape Preston about 100 kilometer south west of Karratha.

In a statement, CITIC said the latest delay was the result of MCC still not having completed the first magnetite production line. Commissioning could therefore not start by the end of this year.

CITIC said that "Although CITIC Pacific is clearly disappointed with the performance of MCC and any cost increase, additional expenditure is necessary to complete the project.”

(Sourced from thewest.com.au)