The Roy Hill Project: Past, Present and Future
Located in the Pilbara region in West Australia, The Roy Hill Project is an iron ore mining project producing about 55 million tonne per annum. The Pilbara is one of the leading iron ore provinces in the world, and is the only independent iron ore project that has a majority ownership by West Australia. Roy HIll is located about 115 kilometres north from Newman. It is a "world class, low phosphorus, Marra Mamba iron ore deposit." A look at the project's history shows its inception beginning in the 1950s and exporting ore for the first time in 2015.
History Behind The Roy Hill Project
Mid - 1950s
The 90s - 2010
HPPL was granted exploration licenses and began exploration drilling. It was concluded that the Roy Hill project was flourishing, as evidenced by the prefeasibility study and bankable feasibility study (BFS).
Total funding was secured to complete the BFS when POSCO Group and STX invested in the project.
Equity agreements were completed stating POSCO, Marubeni Corporation and STX Corporation gained 30% equity interest between them in the Roy Hill project.
A$5.59 billion were granted to Samsung C&T for an Engineering, Procurement & Construction contract to develop the Mine, Rail & Port infrastructure.
The Roy Hill project acquired A$7.97 billion in financial backing.
Roy Hill exported ore for the first time. Despite the steady progress the company has seen throughout its history, some analysts believe that Roy Hill may face challenges in the coming years.
Possible Challenges in Roy Hill's Future
In 2014 Morningstar analyst Mark Taylor noted that Roy Hill's debt component was over 70% of their costs and reflected that the percentage was at the top limits of similar projects. Michael McCarthy, CMC chief market strategist, however, responded that Roy Hill had greater capacity to seek alternative funding sources than Fortescue. He stated, "There is potential to delay the expansion if we see a significant fall in iron ore."
Roy Hill's chief executive Barry Fitzgerald commented that he was comfortable with the long term outlook for iron ore. The reality is, however that iron ore prices dropped from about $130 to $110 per tonne at the beginning of 2014. Furthermore, some analysts predict that the price of ore will decrease to approximately $80 - $90 between 2016 and 2018.