Palmer threatens to sue SMH

CONTROVERSIAL mining magnate Clive Palmer has threatened a Sydney newspaper with a $50 million lawsuit after it raised questions about the state of his Queensland mining project.

The Sydney Morning Herald reported on Friday that a Swiss firm contracted to buy half of all coal produced from Mr Palmer's future coal project - planned for the Galilee Basin west of Rockhampton - had pulled out.

Mr Palmer's companies China First and Waratah Coal are proposing an $8 billion coal mine and infrastructure project.

The loss of that $40 billion contract, as reported by Fairfax, represented a further challenge for Mr Palmer to develop the mine.

In a statement, Mr Palmer said the allegations were "false and misleading", and said it was his companies that had cancelled the contract.

"We believe these allegations were made for an improper purpose and my companies intend to proceed against the Sydney Morning Herald and the journalists concerned and seek $50 million in damages," Mr Palmer said.

He described the China First plan as the "project of the century", which was still supported by two giant Chinese firms.

Its development will include a railway line linking the new basin to Abbott Point near Bowen.

An environmental impact study is still being considered by the Queensland Government.

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