Ansteel replacing WA locals with Chinese workers as Karara plunges deeper into the red while facing ATO probe

Senior employees at Ansteel’s Mid West iron ore operation are being replaced with more than 40 managers and technical specialists parachuted in from China. The miner also faces an Australian Tax Office investigation. Karara Mining slumped to a net loss of $803 million for 2024, according to a financial report filed last week, almost double 2023’s net loss of $411m. Karara’s namesake magnetite project 220 kilometres east of Geraldton has never generated a taxable profit since coming online in 2013 and its accumulated losses now stand at $7.6 billion. But the actual loss figure is likely smaller given Karara’s financials are obscured by a stack of related-party loans. Karara — a subsidiary of Chinese government-owned steel giant Ansteel — owes of billions of dollars to Chinese entities, including Ansteel companies, via dozens of loans. This has also caught the attention of the Australian Tax Office given foreign companies must pay a withholding tax, up to 30 per cent, if they send money overseas to their parent entity. “The ATO is planning to start an audit of these potential tax risk during 2025. The ATO has not yet commenced the audit. The audit process is expected to continue over an extended period,” Karara’s financial report stated. “ATO has acknowledged it may make significant changes to its current assessment of the potential tax risks during the audit and as further information becomes available. “The estimated amount of the potential liability is presently uncertain and cannot be measured reliably.” Finance expenses, which mainly comprise interest payments on borrowings and exchange rate fluctuations, totalled $759m in 2024 versus $308m for the year prior. Revenue fell from $1.1 billion to $895m as magnetite concentrate exports — all to Ansteel’s mills — decreased 7 per cent to 7.42 million wet metric tonnes, while prices for the steelmaking commodity shrunk by more than 25 per cent. Karara’s annual cash bleed grew from $12m to $73m. Ansteel in response “adopted a comprehensive strategy” that continued “to be executed in 2025”, according to the documents. As part of the strategy, “over 40 senior and experienced Ansteel management and technical personnel” were brought in from China to “assume senior executive management and operational positions within (Karara)”. It is believed most of these positions are related to the processing plant. Ansteel has also agreed to reduce the interest rate on its loans to Karara. The loan reduction and relocating a “significant number” of employees from China is being carried out in tandem with a headcount reduction at the mine. “The elements of the strategy include (a) reduction of magnetite production costs through widespread and continuing improvement of productivity and efficiency of operations, transport logistics and procurement including through automation and use of advanced technologies,” Karara stated. When asked about the local job cuts at Karara, WA Mines Minister David Michael said he expects mining companies to “balance staffing requirements with their obligations to the WA community and employment of local workers”. Mr Michael is confident Karara will stick around in WA, despite the apparent financial woes. “The State Government notes the signing of a new 10-year rail haulage contract entered into by Karara Mining, which will continue what is already a long-standing mining operation and rail freight supply chain in the Mid West region,” he said. “The new contract, which commences in May 2027, is an indication of Karara’s long-term commitment to WA.” Karara did not respond to requests for comment. The company’s troubled mining and processing operation employs about 950 workers, according to its website, and cost about $4.7b to build. It is yet to reach nameplate capacity of 8 million tonnes a year of magnetite concentrate — a type of iron ore product. Iron ore projects in WA typically involve mining hematite ore instead of magnetite ore, and the State’s three magnetite projects have all lost their owners significant sums of money. Magnetite has more impurities than hematite so it requires additional processing treatment, which has proven to be extremely complex, but the trade-off is that the final product is higher-grade. CITIC Pacific’s $US12b Sino Iron operation near Karratha was commissioned in July 2013 at triple the budgeted cost and took six years to turn an annual profit. Fortescue’s $5.9b Iron Bridge project has also faced massive cost blowouts and will not be fully operational until at least 2028 — five years later than expected.