Melbourne (Platts)--8Nov2012/440 am EST/940 GMT

Australia's fledgling magnetite sector is ending 2012 on a negative note, with Jupiter Mines scrapping development of its Mount Ida project and CITIC Pacific admitting it is unlikely to export any magnetite from its Sino Iron operation this year.

Perth-based Jupiter said Thursday that it would stop work on its A$1.6 billion (US$1.7 billion) Mount Ida project in Western Australia because of "depressed" iron ore prices, and higher than expected capital and operating costs.

"Jupiter will retain its ownership of Mount Ida and will continue to meet its minimum expenditure obligations on the tenements with a view to protecting the value of the earlier work for potential future development," the company said in an Australian stock exchange filing.

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CITIC Pacific's US$8 billion Sino Iron project, which has already been beset by cost blow-outs, delays and squabbles with contractor China Metallurgical Group Corporation (MCC), was expected to have its second 4 million mt/year magnetite concentrate facility operating by the end of this year. But the company has yet to start production on its first line, which MCC promised would begin by the end of August.

"This [deadline] had been moved back, with first production expected in the course of November, but it hasn't happened yet," a spokesman for CITIC Pacific told Platts. He said the chances of an inaugural shipment before the end of the year were "very slim."

When completed, Sino Iron is expected to consist of six lines producing 4 million mt/year each of magnetite concentrate, for a total of 24 million mt/year.

The additional delay at Sino Iron means the US$2.6 billion Karara magnetite project -- a 50:50 joint venture between Gindalbie Metals and Anshan Iron & Steel -- will likely be the first Australian magnetite project to start shipments.

Gindalbie said Thursday that to date it had shipped 250,000 mt of hematite direct shipping ore (DSO) from Karara and expected the maiden shipment of magnetite concentrate to be made "around the end of 2012."

A spokesman for Gindalbie said the DSO was being sold to a "range of customers" and that Anshan was mainly interested in taking the magnetite. He said initial magnetite production at Karara was "very close" with a trial shipment due before the end of the year, ahead of full commercial shipments starting in 2013.

--Paul Bartholomew, paul_bartholomew@platts.com --Edited by Maurice Geller, maurice_geller@platts.com

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