Australia's Aquila Resources will continue to keep operations on hold at its $7.7bn West Pilbara iron ore project due to a lack of funding amidst rising costs and volatility in the commodity market.
The West Pilbara project has been has been frozen since September 2012, when partners Aquila, mining investment firm AMCI and South Korean steel major Posco, failed to agree on a budget for the 2012-13 financial year.
Arbitration was set to begin on 18 February over the dispute but an agreement has now been reached to continue the suspension of operations until the end of the financial year, reports Reuters.
"In conjunction with this decision, Aquila has also agreed to maintain the project on minimum expenditure for the remainder of the 2012/2013 financial year. Aquila will continue to focus its efforts on how best to progress the project," said the company in a statement.
The West Pilbara iron ore project now joins several on-hold projects that have been delayed since demand from China slowed last year.
The Pilbara region of Western Australia is the largest exporter of iron ore in the world, but a volatile market created adverse conditions for new projects.
Currently under Stage 1 development, the West Pilbara iron ore project is located 30km to 85km south west of Pannawonica and is estimated to generate 30 million tonnes of iron ore a year.
The scope of the project involves the construction of rail and port access infrastructure, adding to the rising costs.
Aquila had recently secured the state environmental approval to construct the proposed Anketell Port and now awaits clearances for the 282km rail line and port construction, subject to the company securing funds to build the mine.