A blow-out in the cost of the Oakajee port and rail project in Western Australia is threatening to derail progress to meet the deadlines imposed by the WA Government, according to a report published today in The Australian.


Oakajee Port and Rail was formed in March 2009 under a State Development Agreement with the WA government for the development of the multi-billion dollar deepwater port at Oakajee, 445 km north of Perth and integrated rail network to service iron ore miners and other port users in the mid-west region.


However, in documents obtained by The Australian, Oakajee partners, Murchison and Mitsubishi, have told the WA Premier Colin Barnett that it will be "extremely difficult" to finalise key implementation agreements by March 31.


In a letter to Mr Barnett in January, Murchison executive chairman Paul Kopejtka and Mitsubishi Development vice-president Saburo Takeuchi wrote that any delays beyond March 31 “could significantly delay the achievements of other key project milestones”.


According to The Australian report, Murchison had estimated the total capital cost for Oakajee at $4.4bn, including a $565 million contribution from the state and federal governments to fund the common-user infrastructure at the port. However, The Australian’s report reveals that the total capital cost of the project is now estimated at $6.7bn, which is thought to include about $930m for the common-user infrastructure.


Oakajee Port and Rail is currently developing a bankable feasibility study and is understood to be seeking financial backing in the US.


Mr Barnett has set the deadline for Murchison Metals and Mitsubishi Development to commit to the development of the project by the end of this year.


Speaking in Parliament last week, Mr Barnett said the WA Government held an option covering technical and design work relating to the port and rail infrastructure. The option could also include environmental and other approvals. If the project does not proceed, the Government would be required to pay $78 million for intellectual property.