Gina Rinehart secures $7.2 bn funding for $10-bn Roy Hill iron ore project

21 Mar 2014

Gina Rinehart, Australia's richest woman, has secured $7.2-billion loan for her $10 billion Roy Hill iron ore mining project,enabling her to emerge as a direct competitor to larger Australian rivals like Rio Tinto, BHP Billiton and Fortescue Metals Group.

Rinehart secured loans and guarantees from five Export Credit Agencies from Japan, South Korea and the US and 19 commercial banks from Australia, Japan, Europe, China, Korea and Singapore.

Rinehart's Hancock Prospecting owns 70 per cent of Roy Hill, while the remaining is held by a consortium that includes Japanese trading house Marubeni Corp with 15 per cent, South Korean steel giant Posco 12.5 per cent and Taiwan's China Steel Corp 2.5 per cent.

The consortium jointly acquired 30 per cent of Roy Hill Holdings in March 2012, for A$3.2 billion. Posco had originally acquired 15 per cent, but in April 2012 sold 2.5 per cent of the stake to China Steel Corp for $316.7 million.

The investment will give the consortium a combined 16.5 million tonnes of iron per year from the mine.

The entire development of Roy Hill project is expected to cost around A$10 billion and is already 30 per cent built.

In March last year, South Korean engineering and construction giant Samsung C&T, which has built the Burj Khalifa in Dubai, bagged a A$5.59 billion ($5.86 billion) order to develop the Roy Hill iron ore project. (See: S Korea's Samsung C&T bags $5.86-bn order to develop Roy Hill iron ore project)

Under the deal, Samsung C&T will build infrastructure for the Roy Hill iron ore project, including a plant that can process 55 million tons of iron ore annually, a 340-km railroad from the project site to Port Headland that will operate eight trains per day, and port facilities that include two berths and container yards.

Construction started in early April 2013 and is expected to be completed by November 2015.

The Roy Hill project is a giant, low-phosphorus iron ore deposit located in the Chichester Ranges of the Pilbara region of West Australia. Hancock holds five tenements collectively referred to as Roy Hill 1 since 1993.

Located in one of the world's premier iron ore provinces, which currently exports more that 300 million tonnes annually, Roy Hill deposit holds more than 2.4 billion tonnes of low phosphorous iron ore resources.

Once operational, Roy Hill targets to produce 55 million metric tons of iron ore a year, adding to the current surplus of the mineral required to make steel.

Iron ore prices are now low because of oversupply and analysts believe it will slide down further to around $80-$90 a tonne, about 23 per cent below current prices.