Citic will take a further writedown of up to $1bn on the value of Sino Iron, its Australian iron ore mine that has so far run more than five times over budget and years behind schedule – as well as landing the Chinese conglomerate in court against Clive Palmer.
The company said lower long-term forecasts for iron ore prices were the reason for the charge, which will be at least $800m. The writedown follows a $2.5bn charge taken two years ago.
Citic began the venture in Australia’s ore-rich Pilbara region in 2006 but it only began shipping ore late in 2013. Last year its final production line went into commission, and the mine exported 11m wet metric tonnes of concentrate in total for 2016.
The company was originally formed at the behest of Deng Xiaoping and was a pioneer in China’s experiments with capitalism. The Hong Kong unit, formerly known as Citic Pacific, was revamped in 2014 when its mainland parent injected $37bn of its assets as part of China’s sporadic efforts to reform state-owned enterprises.
In 2008, Citic Pacific as it then was, was forced to announce a $2bn loss from currency hedges related to Sino Iron that went wrong – triggering a 55 per cent fall in its shares the next day. Those disclosures eventually landed the company’s directors in a Hong Kong court in 2015 when the city’s securities regulator’s pursued them for market misconduct in not announcing the loss sooner.
Citic is still embroiled in legal disputes over rights and royalties with Mineralogy, a company owned by Australian metals magnate and politician, Clive Palmer, its erstwhile partner in the project.