Sinosteel move may sink $6bn Oakajee port and rail project The proposed Oakajee project port facility site near Geraldton, WA. Oakajee Port and rail projects have gotten into trouble. CHINESE metals giant Sinosteel may have killed off the troubled $6 billion-plus Oakajee port and rail development in its present form by shelving a planned $2bn iron ore mine in protest against the mounting costs and delays in building the infrastructure project. The dramatic move is a huge blow to Oakajee Port & Rail's owners, Perth-based Murchison Metals and Japan's Mitsubishi Corp, because Sinosteel's Weld Range project in Western Australia had signed up as one of its three foundation customers. Murchison was locked in crisis talks last night as it scrambled to finalise a bankable feasibility study for the Oakajee project by a deadline of next Thursday, amid speculation the capital costs of the development have blown out beyond $6bn. It was not known whether Murchison and Mitsubishi still consider Oakajee, in WA's emerging Mid-West iron ore province, to be viable without Weld Range. Sinosteel's withdrawal leaves Gindalbie Metals' Karara project and the Jack Hills mine, which is owned by Murchison and Mitsubishi, as the remaining foundation customers for the rail and port network. Murchison shares were placed in a trading halt after falling 5.6 per cent to 76.5c in early trading. Gindalbie shares fell 6 per cent to 84c. Gindalbie managing director Tim Netscher stressed that the company's Karara iron ore mine -- which is backed by China's Ansteel -- needed the Oakajee port to be built to expand production beyond 16 million tonnes a year. Sinosteel's decision to suspend Weld Range may be a deliberate signal of China Inc's mounting anger at the delays and rising costs of the venture. The company has already complained that the delays are costing it $100m a year and that rising capital costs for the deepwater port and 570km railway would increase the tariffs for customers to access the network, potentially making some mines unviable. The move may also be an attempt by the state-owned company to force a restructuring of the ownership of Oakajee Port & Rail that would allow greater Chinese involvement. Chinese investors, including Sinosteel, are believed to have been sounded out about contributing equity to the project, which West Australian Premier Colin Barnett has conceded is lacking financial clout. Murchison is considering selling down some of its stake in the project. Mr Barnett said yesterday that Sinosteel's decision would put pressure on Oakajee Port & Rail to "get a workable project." But he said he expected that once Oakajee's problems were resolved Sinosteel would reactivate the Weld Range project. He was confident Oakajee would still go ahead. Murchison said in March that the estimated cost of Oakajee had grown from $4.4 bn to $5.2bn, after a series of reports in The Australian that suggested the final cost could be higher than $6bn. But market speculation in Perth has suggested that the forecast cost may since have grown above $7bn. Sinosteel said yesterday it had stopped all major work at Weld Range, laid off 43 workers and closed its office in the Mid-West town of Geraldton. It said Weld Range had been "parked" until certainty around the Oakajee development was resolved. We are certainly not closing the door on Weld Range. However, we must make the right business decisions in order to protect our assets and ensure a realistic future for our organisation," chief operating officer Julian Mizera said.