Reuters reported that loan financing for Gina Rinehart's AUD 10 billion Australian iron ore project is being held up by talks on capping construction costs threatening to push the project back after delays caused by a legal feud in the mining magnate's family.

Four sources with knowledge of the deal said that the Roy Hill project, racing to come on line in late 2014 to beat a risk of iron prices sliding, is looking to raise between AUD 6 and AUD 7 billion in project financing, with more than half seen coming from export credit agencies in Japan, South Korea and China.

Roy Hill and potential lenders are concerned about the risk of costs escalating further, as has happened at other Australian resource projects, driven by a scramble for staff and equipment.

Mr Michael Evans an analyst at investment house CLSA said that "The chances of Roy Hill getting first iron ore production in 2014 would be less than 20%.” He said that "The main factor is it takes a lot of time and lot of money to build railway lines and ports in a market that has finite capacity of construction resources.”

Roy Hill, targeting 55 million tonnes a year of iron ore in the Pilbara region in Western Australia, will make Rinehart's Hancock Prospecting Pty Ltd Australia's fourth largest iron ore miner, behind Rio Tinto, BHP Billiton and Fortescue Metals Group.

It may also cement Rinehart as the world's richest woman. Forbes in February estimated her to be worth $18 billion, making her the richest woman in Asia. Australia's BRW magazine subsequently named her the richest woman in the world, worth an estimated AUD 29 billion.

Hancock Prospecting is talking to contractors about sharing the risk of cost escalation to avoid the "cost plus" deals under which clients bears the full burden of any rise in costs.

One of the banking sources, who declined to be identified citing confidentiality agreements said that "The main reason for the delay is the cost blowouts (on other projects).”

Source - Reuters

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