Metallurgical Corp. of China Ltd. (MCC, SHSE: 601618 and SEHK: 1618) is said to sell a majority stake in west Australia-based Lamber iron ore project.
People close to it disclosed in an interview recently that it was busy looking for an investor, expecting to sell a majority stake in the Lamber iron ore project to the latter. It had seen debts exceed CNY 50 billion and in order to pay back the debts, it made such a decision. For it, investing in the project had been proved to be unsuccessful one as on the one hand, it always suffered a loss from the project. And on the other hand, the project advanced slowly.
Available information shows that located in Pilbara, the iron ore project is consisted of three parts, namely north part, central part and south part, each. The service term is 30 years and the designed annual production capacity of iron ore concentrate is 15 million tons. With a total investment of about AUD 3.77 billion, it was scheduled to run into formal operation in 2015.
MCC released financial forecasts for the fiscal year 2012 in March this year and according to the forecasts, the loss was expected to hit CNY 7.2 billion. It reported a profit of CNY 847 million for the third quarter of last year, thus it has become a focal point why the loss for the whole year will hit up to CNY 7.2 billion. In line with industry observers, this should have a close tie with provision for impairment. In detail, it put CNY 3.9 billion aside for impairment for a non-ferrous metal unit, CNY 3.1 billion for the SINO iron ore project, and CNY 2.3 billion for the Lamber iron ore project.
It signed an agreement with Sino Iron Pty Ltd., a subsidiary of CITIC Pacific Ltd. (SEHK: 0267), over the SINO iron ore project in Australia and the total contractual value was USD 1.75 billion. However, the figure continued rising from then on, but there had not been an exact timetable for the kick-off. According to financial results it unveiled for the first half of last year, the contractual value had hit about CNY 3.41 billion. In line with CITIC Pacific, the loss should be mainly attributed to increasing project cost and delaying project kick-off. Zhang Lin, a researcher at Lgmi.com, said that amid recession in the steel market, they had no other choice but to delay kick-off of the project again and again.
