Australia’s Roy Hill iron ore mine, majority owned by Gina Rinehart’s Hancock Prospecting, will soon start exporting the steelmaking material as the company announced that loading into a tanker docked at the project’s Port Hedland wharf has already began.
Slumping prices have raised questions over the $10 billion project as to whether it will generate profits or further depress iron ore prices. For Citi Group the answer is as simple as it is alarming. The bank said in October that new supply from Roy Hill would drag iron ore prices below $40 a tonne in the first half of 2016.
A price below $40 all-in makes life difficult for all but the most cost-effective producers. And as this chart shows, Roy Hill is yet another ultra-low cost producer entering the market:
For Rinehart, however, it is a historic moment because the mine is the first one brought into production by the Hancock family.
“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.
“To paraphrase the great Sir Winston Churchill, may I say to the employees of Hancock Prospecting and Roy Hill — The light of history shall shine on all your hard hats, and the first Roy Hill ship!”
Roy Hill, 70% owned by Hancock Prospecting with the balance shared by South Korea’s Posco, Japan’s Marubeni Corporation and Taiwan’s China Steel Corp., plans to produce 35 million mt/year of iron ore in 2016 and 45 million mt/year in 2017 before ramping up to full capacity of 55 million mt/year in 2018.
Posco, Marubeni and China Steel will take 50% of the eventual 55 million mt/year output, with Chinese steel mills taking most of the balance.
The company had targeted to ship first ore from Roy Hill by Sep. 30.