Aquila Shares Down; Suspends $7.4B Iron Ore Project Due to Funding Struggles
By Esther Tanquintic-Misa | February 4, 2013 5:20 PM EST
Shares of Aquila Resources tumbled down on Monday as it further suspended its $7.4 billion iron ore project in the West Pilbara due to funding struggles.
As of 1452 AEDT, Aquila shares dove 14.5 cents, or 4.65 per cent, lower at $2.975.
Citing soaring costs and the volatile commodity prices in the world market, Aquila said the project's suspension, which was first implemented on September 2012, would continue for the rest of this financial year.
"Aquila will continue to focus its efforts on how best to progress the project," Tony Poli, executive chairman, said in a statement.
Together with partners AMCI, a mining investment firm, and South Korean steel giant Posco, Aquila decided to calendar the budget for the project to June 2013. AMCI and Posco wanted to temporarily hang the project when iron ore prices hit a three-year low in September last year.
Although prices of steelmaking ingredient iron ore have partially recovered, it may still not be enough to fund Aquila's project which requires billions to be spent on rail and port access alone.
Despite the green light the West Australian government has extended to Aquila to develop the Anketell Port, still part of its $7.4 billion iron ore project, analysts believe the project will ever take off.
"Even if they did resolve the budget dispute with the joint venture partner, even if they did find the billions of dollars required to fund the project, you then have the massive risk of development, during which time costs could blow out further," Gareth James, Morningstar Resources analyst, was quoted by The Australian
The West Pilbara Iron Ore project incurred a $1.4 billion capital cost blowout in October.
Even if the project does push through, it would still take time for production to occur, which means zero source of revenue or profit for the company.
"When these announcements come out, for us it doesn't really change much."
"We're of the view that this project is very unlikely to happen."
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