Huge Chinese support for WA iron ore rail line and port

Yilgarn Infrastructure has signed an investment agreement with five major Chinese enterprises to underpin the A$750 million equity needed for the development of the Oakajee Port and Rail Project in Western Australia’s Mid West region. Yilgarn Chairman Dr John Saunders said a crucial component of the agreement was a ‘local content’ commitment by all parties to partner with Australian expertise and suppliers for the development, construction and operation of the estimated A$3 billion infrastructure project. The equity deal follows a commitment by China’s EXIM Bank to underwrite the debt required for the project.

“Yilgarn is forging a highly skilled and competent project team by combining Australian expertise and local inputs with Chinese project execution capabilities,” Dr Saunders said. “Ensuring these commercial partnerships continue to be created and fostered into the construction and delivery phases of the port and rail will ensure the Mid West – and Western Australia – receives the best possible infrastructure development.

“This agreement provides significant opportunities for Western Australian companies to form partnerships in key roles for this project and to take advantage of China’s demand for our products and the need for local expertise. It also sets up a pathway for companies in WA to go offshore to join their Chinese counterparts in the Chinese project and infrastructure marketplace.”

The group of five companies – with combined assets of more than $50 billion and revenues of more than $60 billion – includes some of China’s biggest enterprises in the fields of port and railway construction; railway operations, iron ore trading and steel production.

Dr Saunders said the strong balance sheets and delivery capabilities of the group would provide Yilgarn with significant strategic, technical and financial support and would complement its world-renowned Australian-based engineering and project management team, which includes WorleyParsons Services and Parsons Brinckerhoff.

The Chinese companies are China Railway Materials Commercial (CRM), Sinosteel, Anshan Iron and Steel Group (Ansteel), China Railway Engineering Corp (CREC) and China Communications Construction Corp (CCCC).

CRM’s main business is the provision of materials, and equipment and technology for the construction and operation of the railway system in China and internationally including locomotives, wagons, fuel supplies, operation and maintenance, investment, and training.

Sinosteel is China’s biggest iron ore trading and investment company and engaging in developing, mining and processing of metallurgical mineral resources internationally; trading and logistics of metallurgical raw materials; manufacturing major equipment for the steel industry worldwide. It is the key raw material supplier and sales-agent for major Chinese steel mills.

Ansteel is China’s second largest iron and steel company with steel production of 16 Mt/y in 2006 and aiming to increase to 40 Mt/y by 2011.

CREC’s main business is rail project planning and design, construction and installation, manufacturing, R&D, technical consulting and capital management. CREC has built more than 55,000 km of railway trunk lines, 3,300 km of bridges and 3,600 km of tunnels.

CCCC is one of the world’s biggest infrastructure contractors specialising in marine engineering and port construction and other transportation infrastructure. It is China’s largest port design and construction company and a leading enterprise in road, bridge construction and design. CCCC is the biggest dredging company in China and the third largest in the world.

Saunders said: “With substantial preliminary works done, including engineering pre-feasibility, key environmental investigations and specialised geotechnical, rail alignment and vessel handling studies, Yilgarn is now moving onto definitive feasibility studies with a strong team well equipped to handle this extremely complex development.”  Subject to environmental and other approvals, Yilgarn is on track to start construction in late 2008 for project completion in 2011.

Yilgarn is independent of the region’s mines, which will become customers and users of the infrastructure. There are already agreements signed with Midwest Corp and Gindalbie Metals (as future customers) to work together to progress the development of the port and rail.  Agreements are being negotiated with other mine customers.

Golden West Resources has welcomed the news. Golden West is assessing the Oakajee Port proposal as an option for exporting to Asian markets of at least 10 Mt/y of iron ore from the development of the company’s Wiluna West iron ore project northeast of Geraldton. The project is located 40 km south of Wiluna in Western Australia. The project has already defined 50 Mt of high grade hematite mineralisation, grading 61% iron (Fe). The iron deposits are within five separate semi-parallel mineralised units within the 440 km2 of tenements. The company is employing continuous drilling, targeting a minimum defined resource of 100 Mt by December 2007, as it builds towards Golden West’s major objective of a resource to support a long-life, 10 Mt/y mining operation. Infrastructure planning to accommodate an initial 10 Mt/y from Wiluna to Weld Range to the proposed Port of Oakajee has commenced.