“Very Large Losses” for Export-Import Bank Project
Fourteen months ago, the taxpayer-backed U.S. Export-Import Bank authorized a $700 million loan to Australia’s richest person, mining heiress Gina Rinehart. Today, Australia’s Business Spectator (sub. req’d) reported the new mining project “is set for very large losses.”
In the short term, the capital costs for Gina Rinehart’s Roy Hill mine are almost certain to blow out — and a lower iron ore price will make matters worse.
If the current iron ore price decline continues into 2017 and beyond, then Gina Rinehart’s massive $10 billion Roy Hill mine project is set for very large losses when it starts production next year.
And if the reports of safety problems in the construction phase are right, then the capital costs will blow out beyond $10bn, especially if unions start playing hard ball, as they often do when there is a safety cause.
The slump in iron ore didn’t come out of the blue, though. According to the Business Spectator, “When Roy Hill was being conceived, there were already dark clouds on the iron ore pricing scene.” Will Rinehart’s Roy Hill Holdings be able to repay the $700 million it owes American taxpayers? We’ll find out in about seven years.