pursuits

Billionaire Rinehart’s Iron Mine Seeks to Beat Output Timetable

A water truck sprays water at Roy Hill Mine in the Pilbara region, Western Australia. Photographer: Philip Gostelow/Bloomberg

Billionaire Gina Rinehart’s new $10 billion Roy Hill iron ore mine may almost halve the time needed to reach its annual output target rate of 55 million tons, even though the scheduled first shipment is likely delayed.

The mine in Western Australia’s iron-ore rich Pilbara region may need only 15 months from December to hit the target, Roy Hill Holdings Pty Chief Executive Officer Barry Fitzgerald said Friday in an interview. That compares to an earlier assessment that the ramp up would take 30 months from the mine’s first shipment of ore, he said.

“That is substantially longer than it needs to be, it would be our intention to improve upon that,” he said at the company’s Perth headquarters. “I’m thinking more along the lines of 15 months from December.”

Iron ore prices tumbled in early July to the lowest level since at least 2009 as demand faltered in China, before rebounding into a bull market. As the largest exporters, including Vale SA and BHP Billiton Ltd., raise output to lower costs, a global surplus may grow to 83.2 million tons in 2020 from 58.1 million tons this year, according to Morgan Stanley.

Roy Hill will still seek to meet a deadline of shipping its first iron ore by Sept. 30, despite delays to commissioning the operation. Marubeni Corp. which holds a 15 percent stake according to filings, said Wednesday it anticipates a small delay to the start of exports.

Displace Rivals

“The reality is that it will probably be in that October period,” Fitzgerald said. “There’s a window of opportunity from the end of September to the end of October, it will be in there. In commissioning a processing plant of this size, you never know exactly what that is.”

Rio Tinto Group, the second-largest exporter, forecasts at least 120 million tons of higher-cost iron ore output will exit the market this year, as an additional 110 million tons of new supply is introduced.

“Our product is sufficiently attractive to the marketplace for others to probably be displaced by us,” Fitzgerald said.

Roy Hill will have an all-in cash breakeven cost, excluding interest, of $36 a ton, UBS Group AG analysts led by Glyn Lawcock said in a July 10 note. Only BHP and Rio have a lower breakeven price, of $30 a ton, according to UBS.

South Korea’s Posco and Taiwan’s China Steel Corp. are also partners in the mine, and with Marubeni have committed to take half of annual output. Roy Hill is continuing to seek to add further contracts with customers, Fitzgerald said.

    Before it's here, it's on the Bloomberg Terminal. LEARN MORE