Roy Hill mine contract uncertain after Forge Group collapse

Gina Rinehart’s Roy Hill mine says it too early to speculate how the Forge Group collapse will impact on the $7 billion project.

Forge Group confirmed it would go into administration yesterday after ANZ withdrew its financial support for the company.

The move comes just months after Forge and Spanish firm Duro Felguera were awarded a $1.47bn contract to provide engineering, procurement and construction services at Roy Hill.

The contract was worth $830 million to Forge but now hangs in the balance.

A spokesman for Roy Hill Holdings, which is 70% owned by Rinehart's company Hancock Prospecting, said it was watching events as they unfold, Wall Street Journal reported.

"It is too early to speculate about any potential impacts on the Forge-Duro joint venture or its relationship with Samsung C&T,” the Roy Hill spokesman said in an email.

 Forge was awarded the contract by Samsung C&T, the lead contractor on the mining project.

"We are confident our long term interests will not be compromised," he said.

Receivers have the option of replacing the company with other engineering firms that work with Duro or creating a new company with the Forge employees already working on the project, a source said.

The news comes as a blow to Roy Hill mine which is close to securing the $7 billion debt package needed to give the project its final green light.

At the time it won the contract, Forge’s managing director David Simpson said it was the company’s “largest single contract to date".

The escalated collapse of Forge has caught many in the industry off-guard, with shares in the company falling 85 per cent over the past 12 months as it grappled with project blowouts and massive write-downs.

The future of the Perth-based contractor has been unstable since November when it revealed profits were well below guidance this financial year, revealing a $127 million write down which it attributed to two power station projects.

At the time the company said an internal review had "identified concerns in relation to the underperformance" in relation to its $420 million Diamantina contract in Queensland and its $150 million contract with Rio Tinto at the West Angelas iron ore mine in Western Australia. 

While last-month the company flagged losses for 2014 to total $25 million before one-offs and writedowns.

Simpson has previously said FY14 has been a challenging period with increased competition and slowing domestic activity.

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