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Aquila Resources pulls back spending in the Pilbara

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By Sarah-Jane Tasker

AQUILA Resources is pulling back spending on its $6 billion West Pilbara iron ore project in response to weak market conditions and approval delays.

Aquila executive chairman Tony Poli said the company needed to be more prudent with expenditure until it had received all its approvals for the development.

The project, which involves the development of a mine and supporting infrastructure, is a 50-50 joint venture with private US group AMCI.

“We haven’t agreed a budget for the year at this stage but both parties have agreed to spend a little less before we spend a lot more,” Mr Poli said.

“We are still spending a fair bit of money but let’s not spend a lot of money on long lead time items until we get some of these approvals in place.”

The company’s shares slumped on the news yesterday, falling 10.04 per cent to $2.43, despite Aquila announcing a 40 per cent resource upgrade for the project.

Mr Poli said there were various approvals in the works, including a mining lease and the right to develop a multi-user port at Anketell. West Australian Premier Colin Barnett announced in May that the state government had launched the formal process of land acquisition to enable construction of the Anketell port, 30km east of Karratha.

Aquila has been competing with Fortescue Metals Group to develop the facility but Aquila is tipped to be the favoured proponent because it needs the facility sooner than Fortescue.

Mr Poli said the approvals were taking longer than anticipated but he was hopeful they would all be signed off by the end of the year, the same timeframe he is targeting to finalise Aquila’s share of the funding for the project.

“Once we have all those boxes ticked, then we are in a much better position to consider commencing construction,” he said.

In April Aquila secured some of the money it needs to fund its half-share of the project, after agreeing to sell its 50 per cent stake in the Isaac Plains coalmine in Queensland to Japan’s Sumitomo Corporation for $430 million.

But it still needs about $2.5bn in debt funding from China Development Bank to fully fund its half-share of the port, rail and mine development.

“Clearly we need to get our funding in place and that’s where our focus should be . . . we are still working with CDB and we are still hopeful that they will come to the party,” Mr Poli said.

Mr Poli said he had “fruitful discussions” with CDB in Shanghai two weeks ago.

“CDB have been the banker to a few other projects and Europe hasn’t helped, so most banks have been cautious, but I get the sense that CDB’s appetite has improved of late,” he said.

The sharp fall in the iron ore price, which has had it hovering below $US120 a tonne, has added to market concerns about slowing growth from China and has led to the major miners deferring future growth projects and slowing expenditure in the Pilbara region.

Mr Poli said he was keen to see what happened during the next month with the iron ore price, to determine if it was “bouncing along” the bottom, as many thought, or if it would fall further.