Citic Pacific Ltd., building the world’s largest magnetite mine, said first-half profit dropped 19 percent as losses from its iron ore unit widened.
Net income was HK$4.46 billion ($575 million) in the six months ended June 30, compared with HK$5.48 billion a year earlier, the Hong Kong-based company said today in a statement. Sales decreased 14 percent to HK$41.3 billion.
Citic Pacific’s Sino Iron project in Western Australia, estimated to cost at least $8 billion, has been hit with delays, cost overruns, and wrong-way currency bets. The company said today it restarted commissioning of the first production line in late July after operations were halted in May for repairs and that first shipments of iron ore will be made once it has permission from authorities.
“The sharp decline in profit from continuing business activities was mainly due to our iron ore mine in Australia,” Chairman Chang Zhenming said in the statement. “Our focus for the next six months will be to ensure the stable running of production line one, ramping it up to full capacity as soon as possible, as well as getting the second production line ready for load commissioning.”
The stock slid 1 percent to HK$9.35 at the close yesterday in Hong Kong, bringing this year’s decline to 19 percent. Stock exchange trading is canceled today in the city due to a typhoon.
Iron Ore Loss
The loss from the iron ore unit was HK$1.05 billion, compared with a loss of HK$110 million a year earlier, Citic Pacific said. Finance charges related to the mine jumped to HK$607 million from HK$50 million a year earlier.
“As parts of the mine begin to operate, interest expenses associated with them can no longer be capitalized,” the company said today. “In addition, we also had to increase the provision for the unused gas supply.”
Repairs at its second production line are continuing and could further push back its start, the company said. All six lines, when completed, will be able to produce 24 million metric tons of iron ore concentrate annually. Iron ore concentrate produced to date has been stockpiled near the port, Citic Pacific said today.