Gina Rinehart’s Roy Hill to miss iron ore output target

Gina Rinehart’s Roy Hill Holdings has conceded it will struggle to meet its 55-million-tonne capacity next year.

Roy Hill CEO Barry Fitzgerald, chairwoman Gina Rinehart and Roy Hill COO Sanjiv Manchanda.

Gina Rinehart’s Roy Hill Holdings has conceded it will struggle to meet its 55 million tonne per annum capacity next year as the company’s namesake iron ore mine continues to work through early teething issues.

Speaking to reporters at the mine in Western Australia’s Pilbara region on Wednesday, Roy Hill chief execute Barry Fitzgerald said he believed the mine would have produced about 14 million tonnes by the end of September. The mine was officially handed over to Roy Hill Holdings in February.

Mr Fitzgerald said he expected the mine to hit its nameplate 55 million-tonne-per-year run rate early in the next year, although it would be difficult to make up for lost tonnes over the subsequent months.

While the delayed ramp-up at Roy Hill is minor in the context of the broader international iron ore market, it does come on top of a series of recent production cuts and ramp-up delays by other major players that have contributed to a stronger than expected rally in iron ore prices this year.

Mr Fitzgerald said he was ­satisfied by the progress of the ramp-up, noting that the company was originally advised it would take two years to reach full capacity.

“We set an aggressive target to try to get there by the end of this year. We probably won’t make that, but I think we will be at 55 pretty early on next year,” he said.

“Once you lose tonnes it’s very difficult to make them up; we don’t have a lot of excess tonnes in the system so whatever we lose in the short term next year we probably won’t make up.”

Mrs Rinehart’s Hancock Prospecting owns a 70 per cent stake in Roy Hill, with the remainder owned by Marubeni, Posco and China Steel.

Mr Fitzgerald revealed that the mine had been affected by the detection of cracks in a tunnel under an ore stockpile, which required a temporary shut down as rectification work was carried out.

Korean industrial giant Samsung C&T was the lead contractor during the $10 billion construction of Roy Hill, and has since become embroiled in a series of ugly legal battles with both Hancock Prospecting and various other contractors and subcontractors as it tries to minimise its losses from the contract.

Samsung has previously flagged it has lost around $1bn through its involvement with the project.

Mr Fitzgerald said he was disappointed to see so many legal battles emerge from the project’s construction, but denied there had been a disproportionate number of stoushes out of Roy Hill.

“Do I think it’s disproportional for a $10bn job? Not really. Am I disappointed? Obviously I’m disappointed,” he said. “It would have been nice if everyone had been able to successfully complete the project and perform, but for a variety of reasons some of those things didn’t happen.”

The iron ore price has stabilised in recent months at around $US60 per tonne, with the improved conditions appearing to drive a lift in production out of smaller, high-cost iron ore producing nations and regions such as Iran and West Africa.

Mr Fitzgerald said there were still several investment banks tipping iron ore to slip back below $US40, which he said would limit the amount of marginal production that comes back into the market. “I suspect that anyone who is thinking about bringing a mine back into production would be a very brave person at this point in time,” he said.