Japanese owners Mitsubishi announced on Thursday the project’s budget and staff had been significantly cut and Oakajee Port and Rail would be merged with Crosslands Resources amid a poor economic climate.

Seventy-one employees will lose their jobs across both companies, leaving 44 staff.

The decision is a blow to the state government, with Premier Colin Barnett touting it as the most important infrastructure project for the state.

The decision to put Oakajee on hold was predicted as early as May this year, with the government reallocating $339 million of its budget once set aside for the project.

The project has been in doubt for some time and has faced lengthy delays largely due to trouble in the ranks of its joint venture partners.

However, Oakajee Port and Rail chief executive John Langoulant insisted it would still go ahead despite the delay.

“[Mitsubishi’s] long-term confidence in both projects and the mid-west remains unchanged,” Mr Langoulant said.

“Almost $700m has been invested so far. The slowdown responds to current circumstances and the need for a prudent approach to expenditure.

“The economic environment will be monitored closely, with a view to ramping up once conditions improve and equity discussions progress to a satisfactory stage.”

Mr Langoulant said external economic factors had made it difficult to complete negotiations with potential funding partners.

“It’s no secret that the current economic environment is creating challenges in the mining sector – with many WA companies and producers scrutinising their capital management."

“Our decision to reduce costs is not taken lightly.

“[Mitsubishi] will continue to invest funds into OPR and CRL to complete a number of studies, building upon the recent Jack Hills Expansion Project’s Strategic Asset Review.

The review concluded that Jack Hills was a valuable long-life mining operation and a significant ore resource.”

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