Palmer is embroiled in a legal stoush with CPM over royalties and, according to excerpts from an affidavit read in the WA Supreme Court on June 23, his company Mineralogy has not agreed to support mine continuation proposals needed to keep Sino Iron going.
The affidavit is by former CPM executive director Malcolm Northey and was read in court by CPM’s counsel Charles Scerri.
Palmer has argued in the past that CPM would not close the Sino Iron project due to the amount of money it has invested in it.
When CPM set about building Sino Iron it expected a bill of about $2.5 billion and have it up and running by the end of 2011. Instead, the project is yet to reach its 24 million tonne per annum capacity and its final budget is expected to be north of $10 billion.
However, there seems to be a real risk of the project having to shut down.
The MCPs CPM seeks include increasing tailings storage facility capacity; increasing the waste-drop storage capacity; and increases to the capacity of the existing stockpiles and associated infrastructure at the Cape Preston export terminal.
Without those changes, the Sino Iron operation risks become waste-bound and unable to continue mining.
“If the MCPs are not approved, operations at the project will become severely constrained within 2017,” Northey’s affidavit says.
“If additional areas are not secured to enable the expansion of a TSF in accordance with the MCPs, the project will be forced to suspend operations because it could not store the tailings.”
Northey’s affidavit says CPM cannot progress the MCPs without Mineralogy’s consent.
He warns that besides CPM’s own workers and contractors, such a closure would affect the projects suppliers, the WA government, the local communities and Mineralogy itself.
CPM pays Mineralogy about $10 million a year under Royalty A – the royalty on the unprocessed Sino Iron ore. That payment would likely cease if the project closed.
A key point of the court battle is whether the Royalty B that was part of the Sino Iron deal can still be calculated given the benchmark iron ore price it was to be based on no longer exists.
On the production front CPM is moving towards its nameplate 24Mtpa capacity. Last year it managed about 11Mt and this year it looks like turning out 15Mt.