Lai See | Clive Palmer comes the iron man with Citic Pacific

Relations between the Australian mining billionaire Clive Palmer and the Hong Kong-listed but state-owned Citic Pacific are not getting any better. Their dispute centres on what can best be described as the "troubled" Sino Iron Ore project in Western Australia.

In 2006, Palmer sold Citic the right to mine magnetite iron ore in the Pilbara region in exchange for royalty payments. Citic agreed to build the infrastructure, but the "deal of the century", as analysts call it, because it heavily favours Palmer, has taken a heavy toll on Citic. The original budget of US$2.5 billion has soared to US$8 billion and could reach US$10 billion. That is not counting the bungled US$2 billion attempt at hedging the company's Australian dollar risk that cost chairman Larry Yung Chi-kin his job.

The project is about three years late, and Palmer says Citic owes his company Mineralogy HK$1.58 billion as a penalty payment. Although Citic has provided for a HK$1.52 billion liability in its annual accounts, it is disputing the claim on the basis of unspecified exception clauses in the original contract, according to .

Citic "is trying to avoid payments … because it is in financial difficulties," Palmer said in a press release yesterday. He also accused Citic of unfairly blaming Metallurgical Corporation of China, which won the contract for building the project's infrastructure.

Most of these contracts, he says, have been awarded to "Australian contractors, most of whom were friends of the Australian staff of Citic Pacific employed in Western Australia to run the project."

Unsurprisingly, the two sides are involved in a number of court cases over this. Suing the Chinese state does not sit well in Beijing, so it is going to be to interesting to see how Palmer's plan to build a replica of the Titanic in a mainland shipyard is going to develop. Cynics say this project could be sunk before it even sets sail.