Date: November 08 2012
Premier Colin Barnett has insisted the $6 billion Oakajee port and rail project in WA’s mid-north will be completed despite an announcement it had been indefinitely delayed and 71 jobs axed.
Japanese owners Mitsubishi moved on Thursday to cut the project’s budget and staff, with Oakajee Port and Rail to be merged with Crosslands Resources amid the poor economic climate.
Seventy-one employees will lose their jobs across both companies, leaving 44 staff.
The decision is a blow to the state government, with Mr Barnett touting it as the most important infrastructure project for the state.
But this afternoon Mr Barnett insisted the project had not been shelved.
"Oakajee will happen," he told State Parliament.
"There is 13 billion tonnes of iron ore that will find its way to market.
"I acknowledge today is a setback for Oakajee but I tell you what, we will not give up on trying to achieve this project, I will not give up."
Falling global prices for iron ore, a dispute between China and Japan over islands in the China Sea, a change in Chinese leadership and the costs and risks of the project were factors in the decision to put Oakajee on hold.
The decision is another major blow to the Australian resources sector, coming just months after BHP Billiton shelved $30 billion worth of projects, including the massive Olympic Dam expansion in South Australia and its outer harbour development in Port Hedland.
Andrew Forrest’s Fortescue Metals also dramatically scaled back its multibillion-dollar expansion plans in the Pilbara amid a sharp pull-back of iron ore prices in September.
The Okajee delay was predicted as early as May this year, with the government reallocating $339 million of its budget once set aside for the project.
The project has been in doubt for some time and has faced lengthy delays largely due to trouble in the ranks of its joint venture partners.
However, Oakajee Port and Rail chief executive John Langoulant insisted it would still go ahead despite the delay.
"[Mitsubishi’s] long-term confidence in both projects and the mid-west remains unchanged," Mr Langoulant said.
"Almost $700m has been invested so far. The slowdown responds to current circumstances and the need for a prudent approach to expenditure.
"The economic environment will be monitored closely, with a view to ramping up once conditions improve and equity discussions progress to a satisfactory stage."
Mr Langoulant said external economic factors had made it difficult to complete negotiations with potential funding partners.
"It’s no secret that the current economic environment is creating challenges in the mining sector – with many WA companies and producers scrutinising their capital management.
"Our decision to reduce costs is not taken lightly.
"[Mitsubishi] will continue to invest funds into OPR and CRL to complete a number of studies, building upon the recent Jack Hills Expansion Project’s Strategic Asset Review.
"The review concluded that Jack Hills was a valuable long-life mining operation and a significant ore resource."
Opposition leader Mark McGowan said the indefinite delay was a "significant failure" by the government and the Premier must take responsibility for it.
"The Premier needs to take responsibility for what he said was his number one project and one in which he interferred in commercial processes which were already in train," he said.
Mr Barnett was criticised for attempting to broker finance deals for the project with China.
"That interference, I think, sent the wrong messages to investors in this project," Mr McGowan said.
"[The delay] is very embarrassing for the government but I think it's also terrible for the state of WA."
But Mr Barnett said he interferred to ensure the government would own the port rather than any foreign company.
Chamber of Commerce and Industry WA chief economist John Nicolau said the decision was a clear indication of the increasingly tough business investment environment.
"While there are a number of underlying factors at play, what is clear is that rising costs, in particular the cost of labour, are a major factor," he said.
"There is not much that government can do about a strong Australian dollar or volatile iron ore prices, but a commitment to a productivity lead reform agenda is essential."
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