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Citic warns of up to US$1.8b impairment on Australia iron ore mine
[SYDNEY] Chinese conglomerate Citic Ltd warned on Tuesday its 2014 profit would be lower due to an impairment of US$1.4 billion to 1.8 billion on its Australian Sino Iron mining project, which was hit by falling global iron ore prices.
Iron ore prices have dropped by as much as half in the last year since Sino Iron made its first shipments, with analysts holding out little prospect of an upturn in demand for the metal in the short term. "A key component for consideration is the current and forecasted price of iron ore," Citic said in a statement. The impairment will be reported as a non-cash item, but it will reduce the company's reported 2014 profits, it added.
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.
Citic missed that target and project costs more than tripled, which it blamed on its own inexperience and that of its contractor Metallurgical Corp of China (MCC) in building a project of this scale outside China.
Construction of the project's final production lines is expected to continue according to plan, the company said, with a target to have all six production lines operating by the end of 2016.
Citibank has cuts its 2015 iron ore price forecast to US$58 a tonne from $65, which is below current prices of around US$68 a tonne.