China's Citic plans $1bn write-down on Aussie mine
Total losses on the state-owned company's project are set to swell to $4bn
YASUO AWAI, Nikkei staff writer
HONG KONG -- Citic expects to post an impairment loss of up to $1 billion on its iron ore project in Western Australia for the year through December 2016, the Chinese state-owned conglomerate said Wednesday. The company is scheduled to release its full-year earnings by the end of March.
In Hong Kong trade Thursday, Citic shares opened 1.18% lower, at 11.76 Hong Kong dollars.
This will be the third straight year for the company to record a write-down on the Sino Iron project and will expand the total losses to about $4 billion.
Citic acquired the rights to Australia's largest magnetite ore mine in 2006. The conglomerate has invested roughly $10 billion in the Sino Iron project, keen to tap robust demand from Chinese steelmakers. But the undertaking has been plagued by troubles, and falling prices of resources have only made things worse.
In May last year, construction of all six production lines at the mine was finally completed. Although iron ore prices appear to be recovering, the company has had to once again lower the value of the asset.
Citic is entangled in a legal dispute with Mineralogy, an Australian resource developer from which Citic bought the mine's rights. In the statement released on Wednesday, Citic said the outcome of the dispute will "have a major bearing on the long-term viability of Sino Iron, its profitability and cash flow."