THE WEST AUSTRALIAN
Wednesday, 23 January 2013 09:22
Hancock Prospecting’s $10 billion Roy Hill project faces further delays, after the company moved to push back the appointment of engineering contractors amid rumours one of its major shareholders has retreated from a bid to manage the construction of the Pilbara mine.
A spokesman for Roy Hill rejected suggestions that Korea's POSCO, which holds 12.5 per cent of the project, had withdrawn from contention for the engineering, procurement and contract management of the 55 million tonne a year mine, saying the Korean trading giant "remains in contention".
But he said the EPC tender process, initially expected to be closed by Christmas, had been extended until the end of next month.
POSCO did not respond to a request for comment, but it is understood to have withdrawn some of its staff from WA in recent weeks. Last year, the company was reportedly seeking buyers for some of its 12.5 per cent stake in Roy Hill, although the speculation was denied by the Korean company.
It is understood the decision to delay the ECM contract award was made last week, as technical experts from a number of export finance banks visited the State to conduct due diligence over Roy Hill's planning while Mrs Rinehart negotiates an estimated $7 billion debt package.
In a statement, the Roy Hill spokesman said the decision to push back the EPC contract award was made as part of the process to cut construction costs at the $10 billion project.
"Over the past six months, a successful value engineering exercise has been under way to identify cost reductions and efficiencies across the whole project," the spokesman said.
"During this period, considerable efforts have been made to ensure these cost savings are also reflected in the EPC contract.
"To provide the opportunity for the most competitive price to be secured, the EPC tender period has recently been extended until the end of February. We cannot confirm which parties are involved, however, POSCO does remain in contention."
Accounts released earlier this month showed Roy Hill had $636 million in the bank at 30 June, but in September slashed its workforce and stopped some construction work in an effort to contain costs.
The company also confirmed it would not meet ambitious targets of first production at Roy Hill by late next year.
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