Crazy kiwis push 50mt new iron ore tonnes for Pilbara

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From The West Australian:

The company behind a proposed $6 billion iron ore project in the Pilbara has signed an agreement with a Chinese company to build the mine.

BBI Group announced today it had signed a memorandum of understanding (MoU) with China State Construction Engineering Corporation (CSCEC) to build the Balla Balla mine, port and rail project.

The MoU was signed at a ceremony attended by Prime Minister Malcolm Turnbull and Chinese Premier Li Keqiang in Canberra today.

Balla Balla is expected to employ 3300 workers during construction and create 900 permanent jobs once in operation.

The MoU specifies that CSCEC use Pilbara sub-contractors for all “on-the-ground” delivery and confirms BBI’s commitment to maximising opportunities for local and regional businesses and employees where possible, rather than using fly-in, fly-out workers.

Today’s agreement follows January’s signing of a State Agreement between BBI and the former State Government over the project.

Here’s the plan:

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That deal with a Chinese construction firm looks like Chinese vendor financing is underway, much like Roy Hill got, which might give the project life.

There’s lot’s of problems, though. There’s dirt but it’s a mostly low quality in the 55% purity range. As well, BBI Group doesn’t own enough iron ore itself though others might piggy back its infrastructure and blend ores with it as well.

I have no idea what the break evens for the project will be but it first appeared in a raid on Flinders Mines in 2014 when prices were at $72. If that is a measure of where it thinks the bottom will be then it’s in for a nasty shock.

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I am more inclined to see this as rerun of Baosteel and Aurizon than Roy Hill.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.