Clive Palmer’s Billion Dollar Shakedown – CITIC’s Sino Iron at Risk of Closure

A miners community on the verge of disaster: the Sino Iron project at Cape Preston, set between Gnoorea and Mardie, employs 3000 workers and has given a major boost to WA economy, but now the $16 billion project could come to a violent end.

Official figures suggest the project is a huge success for the region: total export earnings for Australia should exceed $100 billion over the life of the mine, while wages to Sino Iron’s WA workers will reach $8.7 billion, according to a Deloitte report published in 2017. Last year also saw a 36% increase in annual production at the mine compared to the previous year.

So how does a project of such state-wide importance find itself close to an abrupt and painful shutdown? A long-running dispute between billionaire Clive Palmer and the Chinese conglomerate CITIC is at the heart of the issue. Palmer has taken unrelenting legal action against CITIC, seeking royalties from the Sino Iron project, and won, gaining nearly $400 million from CITIC in various court rulings over 10 years. However, this doesn’t seem to satisfy Palmer:

As tenement holder, he has repeatedly denied CITIC (the sub-lessee) access to neighbouring land needed for waste rock and tailings storage and has refused to lodge mine continuation proposals needed to keep the mine operating. Simply put, without more land for operations, which only Palmer can supply, the mine will be forced to shut down.

Palmer’s offer to make the land available to CITIC for $750 million (in addition to what CITIC continuously pays in royalties) is quite unreasonable. The Pilbara project has already cost CITIC $16 billion in development, out of which aggregate payments of $1 billion were made to Mr. Palmer, including the initial acquisition of mining rights and ongoing royalty payments. These payments come while the mine has suffered losses in recent years.

Palmer’s shakedown of CITIC could prove disastrous to the region: Sino Iron employs nearly 3,000 staff and contractors in WA and is expected to deliver $5 billion in royalty payments to the WA government over the next 40 years. This is why even WA Premier Mark McGowan is stepping in, hinting he might reopen the state agreement for discussion, a controversial move which McGowan apparently deems necessary for saving jobs.

In a statement, the Premier also made it clear who he holds responsible for the impasse, saying: “I urge Mr Palmer to resolve the issues with CITIC as soon as possible to ensure CITIC can continue to operate”. Then, on November 29th, speaking in Parliament, Mr McGowan said he was “very disappointed in Mr Palmer’s unreasonable response and his behaviour on this matter”.

This wouldn’t be the first time Clive Palmer un-does a project of this magnitude; his nickel refinery Queensland Nickel, which operated out of Townsville between 1971 and 2016, is in liquidation, after collapsing under dubious circumstances. The supreme court and ASIC are still investigating the demise of the company, which caused over 3000 direct and indirect job losses in Queensland.

Queensland Nickel’s administrators, FTI Consulting, found that the company had “incurred debts of $771 million after going insolvent in November 2015”, and the Court accused Palmer and his nephew Clive Mensink of breaching their duties while running Queensland Nickel, and trading while insolvent.

One thing is certain: the Pilbara communities rely on Sino Iron for their livelihoods. The consequences of Palmer’s battle with CITIC could be catastrophic not only for the workers and the state, but for the Australian public as a whole: the last time Palmer let a company go under, it resulted in the payment of $226 million in public money to workers left without salaries and pensions.

If Palmer wants to do right by the Pilbara workers, he must come up with a more reasonable offer for the disputed land at the Sino Iron site. While no one expects him to give CITIC the land “for free”, as he commented in November 2018, his unceasing legal action against CITIC and the steep price tag he put on the land they so desperately need is a hindrance to Sino Iron’s operations.

A frustrated, loss-making CITIC does not bode well for Pilbara. If the courts, the public and even Premier McGowan can’t get the two parties to negotiate a deal that keeps the project alive and meets Palmer’s rapacious demands, thousands of families in WA could face very hard times, after 40 years of prosperity.

Recommended For You

Leave a Reply

Your email address will not be published. Required fields are marked *