Forbes lister Gina Rinehart’s Roy Hill iron ore mine gets ready for exports: Views differ on the mine’s market prospects

Australia’s Roy Hill iron ore mine, majority of which is owned by nation's richest woman Gina Rinehart’s company Hancock Prospecting is all set to start exports. It announced the loading of iron ore into tankers docked at the project’s Port Hedland wharf. The earlier target for shipping was Sep. 30.

In the mine, Hancock Prospecting holds 70 percent stake after it sold 30 percent stake to South Korea's Posco, Japan's Marubeni Corporation and Taiwan's China Steel Corp.

Momentous occasion

“This is a truly momentous occasion as we receive the first vessel alongside the Roy Hill wharf and the first of our high-grade product is loaded for the steel mills of Asia,” Rinehart said in a statement.

In 2015, Forbes ranked Rinehart as the world’s 12th-richest woman. As Australia’s richest person she owns assets worth $9.5 billion, according to the Forbes website.

Quoting Winston Churchill, the billionaire said, employees of Hancock Prospecting and Roy Hill will have the light of history shining on their hard hats and also on the first Roy Hill ship.

Low prices

The big capacity mine is readying for exports when the global iron ore prices are at a dismal low. Iron ore is world’s second-most-traded commodity after oil and it seems the fall in oil prices has infected iron ore too. Though its export potential looks bright, many analysts hold the view that supply from Roy Hill would drag down prices further and the price may plunge to less than $40 a tonne (AU$54) by the the first half of 2016.

The mine aims to produce 35 million mt/year of iron ore in 2016 to be followed by 45 million mt/year in 2017 and to the full capacity of 55 million mt/year in 2018, reports Mining magazine.

Citigroup view

In a sector and company outlook, Citigroup called Rinehart’s project as an “impending whale” in September as it apprehends shipments from the new mine will push down prices. China is world’s top buyer of iron ore. However, the latest data from the World Steel Association says China’s output declined more than 3 percent in October from a year before, reports The Wall Street Journal.

According to Vale SA of Brazil--the world’s top supplier, global iron-ore exports will reach 1.6 billion tons in 2016 and the oversupply will be in far excess to the demand estimated between 1.35 billion and 1.4 billion tons.

Bullish on future

However, some analysts and the owner of Roy Hill are upbeat that falling prices will not be a constraint for the new mine’s market fortunes. They say the price burden will be more on small producers, farther from Asia, who have to endure higher costs to supply iron ore to steel hubs like China.

“Roy Hill is a long-term project with a long-term outlook, and approximately 90 percent of Roy Hill’s quality product is already under long-term contracts,” Rinehart said in a recent speech in Sydney.

“So we are better situated than most” although “there is nothing we can do about international prices,” Rinehart said.

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