The delay of a multi-billion-dollar magnetite project on the state's South Coast could have major economic consequences for the Albany region.
Grange Resources has announced job and expenditure cuts on its $2.9 billion Southdown project north-east of Albany, which has long been viewed as the saviour of the region's economy.
Grange will cut its workforce on the project from 24 to six over the next five months and cut spending to $2.5 million next year, after spending more than $70 million on the proposed mine over the last three years.
Managing director Richard Mehan says the planned 2015 start up date is now out of the question.
"It's very difficult to predict how long and anything I say in that regard would be a guess but if you cut back expenditure on a project like this it's fair to say it's very unlikely to get started again in the short-term," he said.
"We're doing this because we still seek an equity partner, which we see as essential to get the structure of the project such that we can project-finance it and we also believe there is a lot of uncertainty in the market in the next year or two." LOST OPPORTUNITY It's not the only big iron ore project facing delays in the wake of a significant fall in prices and difficult financial markets but the ramifications for Albany are wide reaching.
The project would have created about 2000 jobs during construction and 600 jobs during production, while it was estimated to boost the local economy by about $60 million every year.
The plans included a 278-kilometre electricity transmission line from Collie to the mine site, with the potential to create opportunities for towns near its route, including Broomehill, Tambellup and Gnowangerup.
It also included the plans for the construction of a desalination plant nearby with excess amount water available to the Wellstead community and other locals.
The Local member of parliament, Peter Watson, says the opportunities were huge for a region that has largely been forgotten by the mining boom that has driven the rest of the state in recent years.
"It's taken away the main driver, which we thought we were going forward with and now we've got to find something else," he said.
"It is a major setback for Albany and the region." Mr Watson said the area will now need to strengthen its focus on other economic drivers.
"A lot of people said Grange would be the rescue of Albany but we have to make sure there's a lot of factors that do it," he said.
"We've got to look at other areas, business tourism and things like that that can get the region going." As well as the general impact on economic growth, the move will also hurt the planned expansion of the Albany Port.
Grange planned to send its magnetite through slurry pipes to Albany for shipping and it required a tripling of the port for the project to go ahead.
Port Authority chief executive Brad Williamson says it's disappointing but the port is still well positioned to maintain strong trade.
"The port still has a very strong trade base in woodchips and grain so it's not as though it's going to cause the port any great problems in terms of continuing to be a business but it would've provided enormous growth," he says.
"That growth side of the business has been impacted but the port still continues to trade as a very strong grain port." THE FUTURE Mr Mehan says despite the move to put Southdown on hold indefinitely, the project is not dead.
"We've achieved a lot of the key milestones for this project, the definitive feasibility study, very cost-efficient non-process infrastructure solutions in the pipeline and the extension to Albany port and our primary approvals," he said.
"We think the project at a better time for us can be picked up and taken forward quickly, so it was a good time to be reducing our expenditure.
"I think it's a good project and a project that will get built because it's close to the coast, has a good port solution and a very good product." Analyst Tim Treadgold, a long-time sceptic of Grange's plans, isn't so sure.
"I think that might be gilding it a bit because it's not that good a project, there are better projects which can deliver a competitive product at a lower price and at the moment costs are king," he said.
"Southdown may be well located and may have a good product but it's got a lot of competition and it can't overcome those obstacles at the moment.
"When will it do that? There are a lot of ducks that need to be lined up, not least the Aussie dollar, the price of iron ore and finding the billions of dollars in money required to build it." RBS Morgan Resources Analyst James Wilson holds a more upbeat long-term outlook for Southdown.
"If iron ore prices maintain current levels and particularly magnetite projects, which often command a premium, it will be a project that gets constructed down the track," he said.
"We are seeing from a number of the bigger majors, the long-term fundamentals of the iron ore market remain intact but in the short-term we are seeing a bit of volatility.
"Given the current state of the iron ore market, which has proven to be relatively volatile over the past few months, and the status of the financial markets, it's probably been a prudent decision to defer that project for the time being until markets are a bit more stable and they can raise the money to put that project into construction." Whatever the future holds for Grange, the local consensus is that it's recent cutbacks are a major blow for Albany.
"It's an extremely disappointing thing to hear," Albany Mayor Dennis Wellington said.
"It was something that was going to expand our population and something that you do need to do to keep up with the ongoing expenditure and infrastructure needs that you have in a city like this, so it is a setback."