China's New Record: World's Biggest Cost Blow-out

China is justifiably proud of its economic development, but there’s one “achievement” rarely mentioned, a project which has suffered what is possibly the world’s worst cost blow-out and completion delay — an iron ore mine which is three years late, three-times over budget; and counting!

When construction started at the Sino Iron project on the north-west coast of Australia in 2006 the wholly-Chinese owned mine and associated processing facility was expected to cost $2.5 billion and start shipping iron in 2009.

At last count the budget had passed $8 billion and was said to be heading for $10 billion with the first shipment date pushed out again just last week to “late March or early April”.

The new deadline was revealed after Sino Iron’s owner, the Hong Kong-based CiticPacific, filed its annual results and provided an update on a mine which has caused nothing but trouble since it was approved, and now threatens to become tangled in legal disputes.

One of those disputes is with the major construction contractor, a Chinese company called Metallurgical Corporation of China, another is with Clive Palmer, the self-made Australian millionaire with a plan to build a replica of Titanic, the unsinkable passenger liner that claimed 1502 lives when it sank in the North Atlantic in 1912.

Palmer pocketed more than $400 million when he sold Citic Pacific the right to mine two billion tonnes of iron ore on tenements he had held for more than 20 years, and also secured a future royalty deal which should be generating more than $100 million a year – if the mine hits its targets.

But, failure to build the mine on schedule and failure to stick to its budget means that Citic Pacific is looking for a way to minimise its exposure to the Palmer royalty which is why the two are locked in a battle in the Supreme Court of Western Australia over the precise terms of the original deal with Citic, naturally, wanting to pay less and Palmer, naturally, wanting to maximise his return for other projects, such as the Titanic replica.

Meanwhile, at the Sino Iron site the latest deadline nears for first shipment from a project which still faces two big challenges.

The first is that Citic Pacific has decided to limit its immediate annual production target to 10 million tons of exportable iron ore a year from two ore-processing “lines” rather than push ahead to the original target of 28 million tons from six lines, a decision which will dramatically increase the cost per ton.

The second is that the export phase of the project will use a shipping system untried in Australia’s hurricane-prone north-west.

Despite the cost blow-out and completion delay Citic Pacific’s chairman, Chang Zhenming, said with the release of the company’s 2012 profit result (down 25% to HK$6.95 billion) that the company would press ahead with Sino Iron.

“We have put so much into this project in every sense, time, energy and capital, that it is indeed gratifying to see the progress we have made despite the delays and unexpected costs,” Chang said.

There has not been a single issue which has tripped Citic Pacific with problems encountered in under-estimating Australia’s high domestic costs, labor shortages, a sharp increase in the exchange rate, and difficulties operating in a remote region.

The challenge of the location will be put to its next test when loading starts for the first export shipments because the Sino Iron project does not include a conventional wharf, opting instead for “trans-shipping” with tugs pulling barges to bulk carriers anchored offshore, a system which works well in calm waters but could be a challenge in heavy seas.

Financially, the Sino Iron project is already a disaster. Whether it can ever recover from the capital cost blow-out is questionable, more so now that Citic Pacific has decided to go slow on finalising what it started because the operating costs will be sky-high thanks to the sunk capital and limited early-year production.

With regards to mechanized data processing procedures, data fusion is defined as an ongoing and hierarchic computational process in conditions of uncertainty. This is based on multiple sources of information that refer to objects in the expanse, with objectives that include: improving measurement performance with regards to a solitary sensor; adding new information fields; creating a situational picture; assessing a situation; creating insights and more.

With the development of sensory measures, the collection of digital information and the computational capabilities of modern processors, there is a growing awareness and desire to impart similar capabilities to automated systems as well. If in the past the bottleneck was in the amount of relevant data available for fusion, then today the bottleneck is the flood of information that cannot be handled by human elements.

The methods and algorithms developed over the course of recent decades are divided into several categories according to the various levels of processing. One of the division manners accepted today was formed in the US starting from the mid 1980s, and is called as the “Joint Directors of Laboratories (JDL) Model.” This model proposes the division of data fusion stages according to the processing of raw data (at the sensor level, for example), object qualities, situation assessment, threat assessment, procedural feedback, and man-machine interface.

Several improvements and expansions were proposed for the model. At the lower fusion levels, we will note algorithms dealing with geographical data, spotting, course tracking and more, among them a "Kelman" filter and a particle filter. We also mention methods for imagery fusion, starting with the single pixel level and up to the level of characteristics, including many registration methods, PCA and wavelet decomposition-based algorithms, Bayesian models, making deductions in conditions of uncertainty (the Dampster- Shafer theory) and more.

The types of systems that make use of the potential embodied in the fusion process are wide, and include civilian, military and defensive electronic systems, such as medical, port security, border, command and control, HLS, air control, field intelligence systems and more.