Resources & Energy
CITIC Limited has an extensive global business covering exploration, mining, processing and trading of mineral resources as well as power generation, with interests in projects in China, Australia, Brazil, Gabon, Indonesia and Kazakhstan.
CITIC Resources is listed on the Hong Kong Stock Exchange. Through its subsidiaries, associate and joint venture, CITIC Resources has interests in oil exploration, development and production; coal mining; import and export of commodities; aluminium smelting; and manganese mining and processing.
CITIC Pacific Mining is developing the largest magnetite operation in Australia, the Sino Iron project (“Sino Iron”), in the mineral-rich Pilbara region of Western Australia.
CITIC Metal focuses on mining project investment and the trading of resources, including ferroniobium, iron ore, steel, non-ferrous metals and coal.
CITIC United Asia holds a stake in China Platinum, China’s largest platinum importer.
Year in review
2014 was a challenging year for the resources and energy sector, which experienced a sharp decline in the price of commodities, particularly for crude oil, iron ore and coal. However, the lower price of coal benefited the company’s coal-fired power generation business in China.
In 2014, the revenue from the resources and energy sector was HK$52 billion, a 39% decrease from 2013. This sector incurred a loss of HK$13 billion, which included a HK$13.7 billion after-tax impairment charge for the Sino Iron project in Australia.
Resources
Crude oil
CITIC Resources owns 50% of the issued voting shares of JSC Karazhanbasmunai (KBM). In 2014, the average daily crude oil production of the Karazhanbas oilfield in Kazakhstan reached 39,000 barrels (100% basis), the highest achieved since CITIC Resources acquired the oilfield in 2007 and a 4% increase from 2013.
The Yuedong oilfield in China started production at the end of 2013, and the average daily production was 6,300 barrels (100% basis) in 2014.
CITIC Resources owns a 51% interest in the Seram Island Non-Bula Block in Indonesia. After successful drilling of two new development wells in 2014, production increased steadily with an average daily production of around 2,800 barrels (100% basis).
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Magnetite iron ore
The Sino Iron Project is 100% owned by CITIC Limited and is being developed by subsidiary CITIC Pacific Mining.
CITIC acquired the right to mine 2 billion tonnes of magnetite iron ore at Cape Preston, 100km southwest of Karratha in Western Australia’s Pilbara region, with options to acquire additional ore. The project is the largest magnetite mining and processing development in Australia.
Shipping started in December 2013, and as of the end of February 2015 more than 2.6 million wet metric tonnes (wmt) of high quality iron ore concentrate had been shipped to CITIC’s own special steel plants as well as other steel producers in China.
The Australian iron ore industry has traditionally been based on the mining, production and export of haematite. By unlocking the value of the magnetite resource, Sino Iron is helping to pioneer a new downstream processing industry in Australia.
Developing a greenfield project of this scale and complexity is not without its challenges. Both the operations and construction teams entered 2015 facing critical tasks, such as improving the stability and productivity of the first two production lines. Construction of production lines three to six is progressing according to plan. Of these remaining lines, three and four are targeted for commissioning in late 2015 followed by lines five and six in 2016. The plan is to have all six lines in operation by the end of 2016.
Copper
In 2014, CITIC Metal together with MMG Limited and Guoxin International Investment Corporation Limited jointly acquired the Las Bambas copper mine project in Peru. Total investment was US$7 billion, with CITIC Metal having a 15% interest.
Coal
CITIC Resources holds a 14% participating interest in the Coppabella and Moorvale coal mines joint venture and certain interests in a number of coal exploration projects in Australia.
CITIC Limited also has a 30% interest in a coal mine in Shandong Province in mainland China. The coal mine has a production capacity of 8 million tonnes, and it achieved full production in 2014.
Ferroniobium
CITIC Metal has a small indirect stake in CBMM, which produces more than 80% of the world’s ferroniobium. CITIC Metal is also CBMM’s core distributor in China. Ferroniobium is mainly used in the production of High Strength Low Alloy steel.
Manganese
CITIC Dameng is one of the largest vertically integrated manganese producers in the world, engaged in the production and sale of manganese products at various stages. CITIC Dameng owns the largest manganese mine in China and has interests in several others mines in mainland China and in Gabon, West Africa.
Power generation
CITIC Limited has interests in a number of coal-fired power stations in China, with a total installed capacity of 6,000MW. Its Ligang Power Plant in Jiangsu province is one of the largest coal-fired power stations in China, with an installed capacity of 3,900 MW.
Although the amount of electricity generated in 2014 declined, a corresponding lower coal price meant profit actually increased.
Trading
CITIC Limited predominately operates its resources trading business through CITIC Metal, CITIC Resources and CITIC United Asia, which includes the trading of iron ore, ferrocolumbium,copper,aluminium ingots, coal, platinum steel and other resources products. In 2014, profitability of the resources trading business was hampered by the drop in commodity selling prices and reduced sales opportunities due to poorer demand resulting from the persistently slow global economic recovery and relatively tepid Chinese economy.