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Rinehart’s Roy Hill project still seeking financial backing

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Construction on Gina Rinehart’s $9.5 billion Roy Hill project is expected to be pushed back to mid 2013 following delays in securing finance for the giant iron ore mine.

Roy Hill general manager of external affairs Darryl Hockey said management was continuing negotiations with lenders, with the talks expected to drag on well into 2013.

“We are currently meeting with our financiers with a view to getting our debt funding package secure,” Mr Hockey told the Mines and Money conference in Sydney on Tuesday.

“It goes without saying that financiers want the security that all risks have been adequately mitigated before they will provide support.”

Mr Hockey said the level of interest from creditors in the project so far had been positive.

Construction of the major iron ore operation in Western Australia’s Pilbara was now expected to begin in 2013, with production to start in 2014.

However, Mr Hockey said it was not possible to predict with absolute certainty the target dates for construction and commencement of production.

“The project will not kick into construction proper until finance is secured well into next year,” he said.

Mrs Rinehart’s Hancock Prospecting, which is behind the Roy Hill project, had originally expected to begin construction in 2011.

The mine aimed to produce 55 million tonnes of iron ore a year.

Asked how the recent weakness in iron ore price had affected the company, Mr Hockey declined to speak specifically about the impact on the Roy Hill project.

He said Roy Hill, compared to other companies, had a low-cost structure and above average product quality.

“So that stands us in fairly good stead,” Mr Hockey said.

Mr Hockey said Roy Hill’s ability to hire overseas workers would prove important to its ability to secure financial backing.

The federal government and Roy Hill have reached an enterprise migration agreement (EMA), allowing up to 1,715 skilled workers from overseas to be hired temporarily if the miner was unable find suitably qualified staff in Australia.

“It goes without saying that financiers want the security that all risk has been adequately mitigated before they will provide support,” he said.

“We need to convince the bankers that if there is a shortfall then we have a contingency plan in place to fill it.

“The EMA is therefore an insurance policy which is critical in the securing of finance.”