Roy Hill awards $3bn worth of contracts as project go-ahead inches closer

Gina Rinehart’s Roy Hill iron ore project has awarded $3 billion worth of contracts for the development of the mine as the company moves closer to securing the $7 billion needed for its future.

Gina Rinehart’s $10 billion Roy Hill iron ore development is undertaking one of the largest debt-raisings ever attempted in the mining sector, seeking $4 billion in funding from export credit agencies and an additional $3 billion from commercial banks.

The Roy Hill project includes a new 55 million tonne per annum iron ore mine, 344 kilometres of railway and a new port at Port Hedland.

Roy Hill said it is pushing to complete financing before the year is out, with production scheduled to commence in September 2015.

Yesterday, the biggest contract yet was announced, with Downer EDI winning a 4 year contract for mining services worth $500 million, which some see as a clear sign the project  is set to receive the go ahead.

Other contracts handed out include a $620 million rail earthworks contract to NRW, $830 million to Forge Group for construction and processing works and $70 million to Brookfield Multiplex to develop non-processing infrastructure.

The latest deal comes just days after reports that the US government owned Export-Import Bank gave preliminary approval for $US694m ($737m) in financing for the project,

 The Australian reports that the bank’s loan will support the purchase of equipment from US companies.

Roy Hill has also sought support from the big four Australian banks and foreign investors.

Roy Hill Holdings is 70 per cent-owned by Rinehart's Hancock Prospecting. Selling off 30 per cent of the project last year, the remainder is now owned by South Korea's Posco, Japan's Marubeni and Taiwan's China Steel Corporation.

Construction of the Pilbara-based project is continuing, despite chatter around delays, with some analysts predicting full production will not commence until 2017.

However the miner has continued to reaffirm that the project remains on track.

"Roy Hill's project development has not been delayed, we remain fully on track," a company spokesman said last week.

With cash costs of about $US37 per tonne, JPMorgan said it expects Roy Hill will sit in the middle of the cost curve for iron ore projects.

The analyst said Roy Hill has the potential to add 7 per cent to Australian iron ore supply.

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