Citic records $2.5bn writedown at Sino Iron project

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The impairment included $1.7 billion of intangible assets and $794 million of property, plant and equipment, the company said in its earnings report earlier this week.

The aggregate after-tax impairment of $1.75 billion is at the upper end of the Chinese conglomerate’s estimate earlier this year, when it warned of a possible impairment of up to $1.8 billion net of tax.

Metal Bulletin’s 62% Fe Iron Ore Index has dropped 22% so far this year, after being halved over the course of 2014. It was at $55.81 per tonne cfr Qingdao on Wednesday March 25.

The Sino Iron project – located in Cape Preston, 100km south-west of Karratha in Western Australia’s Pilbara region – is the largest single investment in Australia made by a Chinese company. It is also the largest resources investment made globally by a Chinese company.

It has shipped high-quality iron ore concentrate since the end of 2013 to Citic’s special steel plants and to other steel producers in China.

With iron ore prices hovering at record lows, high-cost producers across the world are struggling to stay in business.

Earlier this month, Anglo American reported a $3.5-billion impairment charge at its 26.5-million-tpy Minas-Rio iron ore project in Brazil, while Japan’s Sumitomo reported a $543-million writedown for its Brazilian iron ore joint venture.

Glencore’s Sphere Minerals subsidiary mothballed its Askaf iron ore project in Mauritania a few weeks ago.