BEIJING—A dusty $8 billion Australian mine that has yet to export a chunk of ore is emblematic of why China is rethinking its huge, multiyear effort to buy up resources abroad.

The mine, the Sino Iron project more than 900 miles north of Perth, in Western Australia, was launched in 2006 with an estimated $2.5 billion in development costs. The mine was to supply China with iron ore, a crucial steelmaking ingredient, and help China break into a global mining market dominated by BHP Billiton , Rio Tinto and Vale SA .

Instead, Chinese owner Citic Pacific Ltd. has grappled with everything from high labor costs and naturally occurring asbestos in the rock to a massive ore-grinding mill that years after its installation still doesn't work.

"These mills are the biggest in the world, and it is not unreasonable to expect that there would be some problems due to their complexity," said Damian Connelly, director of Perth-based consultancy Mineral Engineering Technical Services. "Had they used conventional gearbox pinion-drive mills, these problems wouldn't have arisen to the same extent."

Analysts say the project's capital expenditure could reach $11 billion. Citic Pacific, an arm of state-owned Citic Group, declined to respond to requests for comment.