Gina Rinehart, the billionaire mining heiress, is betting big on iron ore with the construction of the $10 billion Roy Hill Mine in Australia’s outback.
The mine could be the world's last big iron ore mine for years to come in the Australian outback as iron ore prices continue to tumble.
Since construction of the $10 billion Roy Hill mine began four years ago in partnership with South Korean steelmaker POSCO, Japan's Marubeni Corp and Taiwan's China Steel Corp, iron ore prices have slumped 70 percent and forecasters see worse to come, Reuters reported.
Blueprints for new mines are being abandoned from Australia to Guinea, with a West Africa mine shelved this month after commodities group Glencore conceded there was no prospect for a "profitable development."
Analysts blame a massive rise in production on overestimates of China's appetite for imported ore by sector titans Vale of Brazil and Australians Rio Rinto and BHP Billiton.
Together with Australia's Fortescue Metals, these companies added 234 Mt (256 million st) of iron ore in the past two years - five times yearly U.S. consumption - and intend to inject another 196 Mt (216 million st) by 2020.
Their strategy is to eliminate competition, even it means driving down the price to the break-even point.
The Roy Hill mine will add another 55 Mt (61 million st) of high-grade ore.
Rinehart's estimated A$14.8 billion ($11.3 billion) fortune comes from royalties negotiated by her father, Lang Hancock, after he discovered vast iron ore deposits in 1952.
Rinehart personally led the way in obtaining $7.2 billion in debt funding for construction, finally securing a deal in March last year for the Roy Hill Mine. By September, Rinehart wants to see the first ore from the mine ready for loading.
"In terms of the iron ore price, I wish it was two years ago. All we can do is deal with the situation we have," said Roy Hill Chief Executive Barry Fitzgerald.
"There's no doubt both the shareholders and the financiers would like us very much to complete the project, to commission it and then ramp up as efficiently and as effectively as we can."
Roy Hill hopes to set itself apart through its international partners, who hold a combined 30 percent stake and plan to buy half the mine's output.
That cuts exposure to China, which accounts for the bulk of the world's seaborne iron ore market, but where signs are emerging that demand is peaking.
The mine should also benefit from the quality of its ore. About 60 percent of the mine's yield will be in lump form, which fetches about a $10 per tone premium over the benchmark as it requires less processing.
But the project still faces hurdles, with production costs likely to be above its larger rivals given the need to mine deeper to get at its ore, according to analysts.