MELBOURNE, March 21 (Reuters) – Australian billionaire Gina Rinehart has secured $7.2 billion in debt for her Roy Hill iron ore mining project, completing all the funding for a giant mine in Western Australia due to start exporting in late 2015.
The 55-million-tonnes a year mine will make Roy Hill Australia’s fourth largest iron ore producer, adding to a looming supply glut built up by bigger rivals Rio Tinto , BHP Billiton and Fortescue Metals Group. “We look forward to becoming a major iron ore producer on an international scale,” Rinehart, chairman of Roy Hill and Asia’s richest woman, said in a statement.
The $10 billion project is already 30 percent built, the company said, including dredging for two deepwater port berths, an airport with a runway big enough for a Boeing 737 plane and villages to house 3,600 construction workers and 2,000 operational staff on site and at Port Hedland.
The debt financing, the biggest ever provided for a mining project, is made up of loans and guarantees from five Export Credit Agencies from Japan, South Korea and the United States and 19 commercial banks from Australia, Japan, Europe, China, Korea and Singapore.
Rinehart’s Hancock Prospecting Pty Ltd owns 70 percent of the project, with Japanese trading house Marubeni Corp holding 15 percent, South Korean steel giant POSCO 12.5 percent and Taiwan’s China Steel Corp 2.5 percent.
The funding was precedent-setting not only in size, but also in that the owners did not have to provide a completion guarantee to the lenders, and the Japanese trading house Marubeni was willing to put up equity for the project ahead of debt being lined up, a banker familiar with the deal said.
The impending iron ore oversupply is unlikely to deter Rinehart and her partners from going ahead with the project, despite major banks forecasting iron ore prices will fall to around $80-$90 a tonne, about 23 percent below current prices.
The mine is expected to be cash flow positive even if prices fall that low, the banker said. He declined to be named as the terms of the deal were confidential.
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