By Courtney Pearson
THE sheer size and cost of the Roy Hill project in WA’s Pilbara region is a testament to risk-taking.
The tenements comprising the Roy Hill project, 115km north of Newman in WA, were originally owned by BHP Billiton. When the company dropped them, mining magnate Gina Rinehart took a risk and picked them up in 1993 – just a year after taking on the executive chair role with Hancock Prospecting. At the time, it was seen as a risky decision.
“When [BHP], the most knowledgeable company in iron ore in the Pilbara [at the time]… decided that the Roy hill area was not of value, you can understand why people thought this was not a viable opportunity, especially when our company was in such difficult financial times,” Mrs Rinehart said at the International Mining and Resources Conference (IMARC).
Mrs Rinehart received the Lifetime Achievement Award at IMARC, and spoke of the “journey to becoming the largest iron ore mine in Australia – a vast mega project that will earn export revenue for Australia for 20 years or more”.
It’s no exaggeration to say the Roy Hill project is one of national significance – 40,000 people were involved in the construction phase of the 55 million tonne per annum project.
The $10 billion project involves an iron ore mine, a 344km single line heavy haul railway and purpose-built port facilities at Port Hedland.
Roy Hill Holdings operates the project, and is majority-owned by Hancock Prospecting, (70 per cent interest), together with a consortium comprising Marubeni Corporation, POSCO and China Steel Corporation owning the remaining 30 per cent.
Roy Hill is currently operating ahead of schedule – four mining pits are working successfully, the railroad and wagon loaders and unloader are operating and the marine port is progressing ahead of schedule.
“Roy Hill is a symbol that Australians can overcome a mountain of obstacles and still do it,” Mrs Rinehart said.
The project is now more than 92 per cent complete after more than 38.2 million hours on site.
Roy Hill chief executive Barry Fitzgerald said the project was “a significant contributor to the business world of Australia and the Australian economy”.
“Our expenditure is greater than the Western Australian infrastructure budget,” he said.
Mr Fitzgerald said the company had learned a lot through the years, particularly when the project was doubted.
“…when you go back four years ago there were a lot of people that doubted us as a good investment, doubted us as a good project [and] doubted whether our chairman Gina Rinehart could get the project up,” Mr Fitzgerald said.
“One of the great things [we have learned] is resilience and the second is making sure you do what you say you’ll do.
“I think our path has become a lot easier over the years by being able to demonstrate that we do what we say we’re going to do.”
Switching the focus
With construction nearing completion, the focus at Roy Hill has shifted to the transition to commissioning and operations.
The mine itself is a conventional open pit, drill and blast, truck and excavator bulk mining operation. Multiple pits at Roy Hill will be in production at any given time, with the deepest pit less than 110m deep.
The project has a defined mineralisation of more than 2.3 billion tonnes grading 50 per cent iron or higher, with an initial mine life of 17 years and an extension of 12 years.
Five ore trains per day will operate from Roy Hill, each carrying 31,132t of ore to the dedicated port stockyard facility in the Boodarie Industrial Estate south of Port Hedland.
Mr Fitzgerald said Roy Hill was a margin-focused, cost-focused project.
“As time has progressed we have had to be able to demonstrate that we are in there giving things a good chance and finding ways to do things differently, making sure that we challenge the paradigms and set parameters that make us a lot more efficient,” he said.
“[The] four years [since construction began] have been a journey of focusing on sustaining low cost production of ore that is consistent in grade and quality, and that means that we’ve needed to apply innovative thinking and drive improvement.”
The lead contractor building Roy Hill, Samsung C&T, and its subcontractors, have been racing to finish the project to avoid penalty fees for delays.
Penalty fees began at the end of October at a rate of $2 million for each day the project is overdue.
The first shipment of Roy Hill ore was set to take place in the last two months of 2015, delayed from the original September target, according to Roy Hill Holdings.
“For projects of this scale and complexity it is not unusual for minor slippages such as this,” Roy Hill Holdings said in a statement.
“Our equity partners and lenders are fully aware of this schedule and are supportive.”
However, WA Premier Colin Barnett was pessimistic about the timing of the first shipment.
“I suspect it probably would be early next year, but that is my guess,” he told the ABC.
“It is a $10 billion project: a mine, a railway, a port and then all the equipment has to be commissioned – they have to get the safety regimes in place and any of these projects take a long time.”
Roy Hill Holdings stated that it was on track to deliver first shipment of ore for export in late 2015.
“We are…in the process of commissioning a wide range of pieces of equipment,” Mr Fitzgerald said.
“The challenge for us is ramping up to 55mtpa as quickly and as efficiently as we can.”