Rinehart’s Roy Hill contract will be announced this week

Gina Rinehart’s Roy Hill project is set to announce its preferred engineering and procurement contractor in coming days.

It has been reported that the mining magnate will snub a tender submitted by companies associated with her equity partners in the project in favour of a cheaper bid.

According to the West Australian, a joint venture between Korea's POSCO E&C and STX Corp has begun winding down operations in Perth in anticipation of losing the contract, moving to repatriate senior staff and dedicated Roy Hill workers to Korea.

POSCO E&C is subsidiary of Korean based POSCO which, like STX, is a minority investor in Roy Hill.

A Roy Hill spokesman yesterday confirmed the company will make a final decision on the contract after final were received on March 8.

But he refused to comment on rumours POSCO and STC had lost out to a rival bid.

The rival bid is expected to have been lodged by Korean rivals Samsung.

"We can confirm that we received final bids from two world-class EPC delivery providers on March 8 – this was for a fixed-price single EPC wrap which will provide certainty and security for our investors," the spokesman said.

"In accordance with the agreed procedures we are currently undertaking a due diligence evaluation of the preferred bid. The determination to award has not yet been made."

The fixed price contract could assist Rinehart in negotiations over debt funding for the project, as the winning contractor will carry the risk of cost blow-outs and delays, alleviating some concerns bankers may hold.

Roy Hill last year delayed its announcement of who will secure the EPC contract, urging bidders to review submissions in order to find additional savings.

The contract is estimated to exceed $6 billion, and $3 billion has already been spent or committed on the 55 million tonne per year mine.

It remains unclear whether losing the contract will affect POSCO and STX's commitment to the project, nether has fully paid their equity contribution.

POSCO holds a 12.5 per cent stake in Roy Hill and STX owns 2.5 per cent.

An announcement on the Roy Hill contract is expected this week. 

To keep up to date with Australian Mining, subscribe to our free email newsletters delivered straight to your inbox. Click here.