Citic warns of possible $1.8bn impairment in 2014 accounts
Citic, the largest Chinese conglomerate listed in Hong Kong, has warned its investors of a possible impairment estimated at $1.4-1.8 billion, net of tax, in its 2014 accounts.
“A key component for consideration is the current and forecast price of iron ore,” Citic said on Tuesday January 20. “Shareholders will have noticed the significant decline over the past months in the price of iron ore.”
Metal Bulletin’s iron ore index for 62% Fe material went down by $0.52 on Monday to $68.09 per tonne cfr Qingdao amid slow business. The index last fell below the crucial $70-per-tonne barrier on January 13.
Impairment is a non-cash item, but it will reduce the company’s 2014 profits, it explained.
Sino Iron, the largest magnetite iron ore development in Australia, has been shipping high-quality iron ore concentrate since the end of 2013 to Citic’s special steel plants and to other steel producers in China.
The company reported that construction of production lines Nos3-6 is progressing according to plan. Of these lines, No3 and No4 are expected to begin the commissioning process in late 2015, to be followed by lines No5 and No6 in 2016.
The plan is to have all six production lines operating by the end of 2016.
Last week, global investment banks such as Citi, UBS and Macquarie all slashed their forecast prices for iron ore on continued oversupply, falling supply costs and the strength of the dollar.