Parts of Roy Hill mine behind schedule

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    Parts of Gina Rinheart's Roy Hill mine behind schedule

    PUBLISHED: 2 hours 58 MINUTES AGO | UPDATE: 2 hours 58 MINUTES AGO PUBLISHED: 14 Feb 2015 PRINT EDITION: 16 Feb 2015

    EXCLUSIVE
    Roy Hillchief executive Barry Fitzgeraldhas conceded a string of safety incidents has exposed teething problems and put parts of the $10 billion Pilbara iron ore mine behind schedule.

    Mr Fitzgerald, the man in charge of Gina Rinehart's massive project, said construction work at the mine's processing facility was about six weeks behind schedule and part of its port development was "not progressing as well as we would like". But he was confident his team could still ship the first ore from the mine by the end of September.

    "The systemic learning is that we need to be much more questioning at the very foundation levels and maybe the reality is we have been building a house where the foundations haven't been as solid as they could have been," Mr Fitzgerald told The Australian Financial Review.

    Since the beginning of July, 31 safety incidents at Roy Hill were reported to the state's Department of Mines and Petroleum. As a result, nine prohibition notices were issued, including a January notice that banned the use of cranes at the processing facility.

    Combined with a "hiatus" at one part of the project's port development after a contractor walked away from the job, it has triggered speculation among analysts and some industry players that Roy Hill might miss its September target to ship its first ore or it will cost more to achieve.

    When at capacity Roy Hill will produce 55 million tonnes of ore a year, further swelling global iron ore supplies and adding pressure to the already depressed iron ore price.

    One mining analyst, who declined to be named, said while Roy Hill might export ore in September it would take some time before it was producing at capacity.

    "They'll have a 'public' start date and it might just be one tonne of ore," the analyst said. "Most people have a more cynical view of the ramp-up [to full production] than they did for Fortescue."

    Another analyst said the speed of the ramp-up would be dependent on the amount of cash the company was willing to pour into the project in its first year.

    Patersonshead of research Rob Brierley said Roy Hill management was probably working overtime to redeploy more equipment, people and funds to the affected areas but the success of this would be reliant on whether the necessary infrastructure was available.

    "At this point in time they are going to be working hard to catch up," he said. "What a delay would mean for them would be a delay in cash flow and normally when there are time lags there is also extra expenditure."

    Mr Fitzgerald remained "very confident" Roy Hill would meet its September deadline, with recovery programs in place to make up for lost time.

    "We are comfortable and confident we can continue to catch up and do what we need to do to ensure we can achieve our first ore on ship," he said.

    Some of the cranes brought into service by its contractors had not been erected and commissioned correctly, causing a series of incidents, he said.

    There were 38 of 48 cranes in action now.

    The safety incidents in January and the ensuing investigations had delayed construction at that "package of work" by about six weeks, he said.

    "What that highlights is in that particular circumstance ... we could have done different things about more inspections, more rigour on the competence, more rigour on the certifications the cranes were actually ... configured back to the original manufacturers," he said.

    Roy Hill is aiming to be at capacity 30 months after its first shipment but Mr Fitzgerald has said he believed the project had the capacity to beat this target.

    Australian Workers Union West Australian branch secretary Stephen Price said there hadn't seemed to be any additional pressure imposed on contractors to meet the schedule but he would be watching closely to ensure this did not happen.
 
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