Aquila seeks new partner for $7 billion Australian iron ore project

MELBOURNE (Reuters) - Aquila Resources Ltd (ASX:AQA) said on Friday it has held talks to bring in new investors for a long-delayed $7 billion iron ore project in Australia, as one of its key partners may no longer be committed to the development.

The West Pilbara Iron Ore Project (WPIOP) was put on ice earlier this year as the partners could not agree on a budget to proceed with preparatory work, and Aquila said on Friday they had failed to sign off on a budget for the 2014 financial year.

The A$7.7 billion ($7.14 billion) development is one of a number that have stalled since the mining boom cooled last year in the world's top iron ore exporter after Chinese demand slowed.

It is a joint venture between Aquila and AMCI (IO) Pty Ltd, which in turn is 51-49 percent owned by U.S.-based resources investor AMCI Investments and South Korean steel giant POSCO .

U.S. investor AMCI may be looking to quit the project, Aquila said.

"Should AMCI Investments Pty Ltd seek to divest its interest, the joint venture agreement contains pre-emptive and change-of-control rights that give (Aquila) some influence over such a divestment and (Aquila) has held discussions with parties exploring potential equity investment in WPIOP," Aquila said in its annual results announcement.

Several iron ore projects are on hold in Western Australia due to lack of access to rail lines, which will cost billions of dollars to build.

Projects are also becoming tougher to justify as the major producers, Rio Tinto (RIO.AX)(RIO.L), BHP Billiton (BHP.AX)(BLT.L) and Fortescue Metals Group Ltd (FMG.AX) are forging ahead with massive expansions at much lower production costs, crowding out smaller potential rivals.

(Reporting by Sonali Paul; Editing by Richard Pullin and Joseph Radford)