Aurizon Holdings Ltd. Monday reduced the projected port and rail capital spending forecast by 25 percent, or A$1.5 billion ($1.1 billion). The partners are seeking to make further budget cuts, Chief Executive Officer Lance Hockridge said in an interview with Bloomberg Television’s “Asia Edge.”
Iron ore prices last month dropped to the lowest level since at least 2009 as miners boosted output, while demand growth stalled in China. It’s unlikely the West Pilbara iron ore project will begin output before 2020, consultants Wood Mackenzie Ltd. estimated in May.
“We continue to work on what the operating environment and cost will be, what the opportunity is for reducing capital costs,” Hockridge said. “The mine people are looking at what the quality and costs are from that point of view.”
Aurizon rose 3.6 percent to A$5.24 in Sydney after it earlier announced better-than-expected full-year earnings.
Delay Plans
Aurizon’s growth projects, including West Pilbara, are being considered amid a “more challenged” world for commodities, as the prices of oil to iron ore fall in a wider rout of raw materials, Hockridge said.
“We have always said they will only proceed in circumstances where we and our partners can be convinced that we can make our target returns,” he said.
The total project, including the mine, may cost about A$7.4 billion, according to a 2012 estimate by Aquila Resources Ltd., which previously held a stake in the development and was acquired by Aurizon and Baosteel last year.
Aurizon has a 15 percent stake in a half share in the West Pilbara project, with Baosteel holding the other 85 percent, according to filings. The remaining half share is split between American Metals & Coal International with 51 percent and Posco, South Korea’s biggest steelmaker, with 49 percent.
Baosteel, AMCI and Posco didn’t immediately respond to e- mailed requests for comment.
Baosteel Group Corp.’s proposed Australian iron ore project is undergoing further cost review and will only proceed if the developers are satisfied that its return targets can be met, according to the venture’s railroad partner.In May, Aurizon announced that it had agreed with Baosteel to delay plans for the development by at least 18 months, though the technical and commercial feasibility study would continue.
Source: Mine web
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