Billionaire Rinehart Says Mine Well Situated as Iron Ore Slumps

  • Gina Rinehart's $10 billion mine preparing to begin exports
  • Operation using drones to help cut costs amid iron ore rout

Billionaire Gina Rinehart said her $10 billion new iron ore mine is better positioned than competitors to withstand weaker prices as it prepares to start exports.

“In terms of the world iron ore market, Roy Hill is a low-cost producer,” Rinehart, chairman of Hancock Prospecting Pty, which controls Roy Hill, said Thursday in a speech at a Sydney Mining Club dinner. “With consistent quality, we are better situated than most.”

A second ore carrier will arrive Friday at Western Australia’s Port Hedland, the world’s biggest bulk export terminal, to collect Roy Hill cargo, Rinehart said. The vessel is the MV Dream Power, Roy Hill Holdings Pty said in an e-mailed statement. A first vessel is currently being loaded at the terminal, though its departure with the mine’s first shipments has been delayed until next week, Roy Hill said earlier Thursday.

Iron ore has tumbled almost 80 percent from a 2011 peak amid the slowest economic growth in a quarter of a century in China, the top consumer, and as the largest suppliers increase output. New supply from Roy Hill will contribute to a slump below $40 a metric ton, according to Citigroup Inc., which has described the mine as “an impending whale.”

The impact of Roy Hill on the iron ore market has been overstated, Chief Financial Officer Garry Korte said in Sydney, speaking alongside Rinehart, Australia’s richest person. The operation is targeting an eventual output of 55 million tons a year, while Brazil’s Vale SA -- the largest exporter -- forecasts its expansions will raise production to as much as 450 million tons by 2019.

“What seems to have been ignored is that prices dropped last year, and then again this year before Roy Hill has shipped any tonnage at all,” Korte said. “The criticism from some quarters that Roy Hill has somehow single-handedly led to the price reduction we see in the market is completely unjustified.”

The operation is deploying drones to help lower costs, something that’s “particularly important given the tough iron ore price environment,” Korte said.

Hancock holds 70 percent of Roy Hill Holdings, while partners Marubeni Corp. own 15 percent, South Korea’s Posco has 12.5 percent and Taiwan’s China Steel Corp. holds 2.5 percent, according to the producer’s filings. The three partners have committed to take about half of annual output. About 90 percent of the mine’s production is under long-term contracts, Roy Hill said in October.

Ore with 62 percent content delivered to Qingdao fell 0.9 percent to $40.75 a dry ton on Thursday, a record low in daily prices compiled by Metal Bulletin Ltd. dating back to 2009.

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