It's a steep climb up the launching pad for Roy Hill
The huge Pilbara iron ore project could start exporting next year, writes Peter Ker.
Amid the constant conjecture over its ability to secure debt funding, it's easy to imagine Gina Rinehart's Roy Hill project as nothing more than sketches on a drawing board.
But out in the red expanse of the Pilbara, the vast project is already coming to life.
Hundreds of dwellings and other buildings are already in place at the mine site village, which is serviced by Boeing 737 aircraft multiple times each week.
Earthworks for an ore processing unit are under way, and the project's footprint is not limited to the 34-kilometre patch of the Pilbara that will be mined for iron ore.
Roy Hill is a port and rail construction project too, meaning works in its name are under way 344 kilometres away in Port Hedland and almost 1300 kilometres away in Perth, where the project will be controlled remotely.
The remaining 10 weeks before Christmas loom as a particularly busy period for the project, which is a joint venture between Mrs Rinehart's Hancock Prospecting, Korean steel giant Posco, Japan's Marubeni and China Steel Corporation.
The joint venture will move into its new high-tech home near Perth International Airport in November, from where the mine, port and rail connections will be controlled.
About 4500 workers' rooms will be ready by November, and most significantly, the company hopes to have its debt finance sufficiently settled before the end of the year to officially declare the project under way.
"From now to Christmas there will be a lot of development occurring; we will have to increase the number of flights," said project communications officer Darryl Hockey. "Our lead contractor Samsung C&T has awarded all of its main contracts already, and mobilisation will soon follow."
Those contracts are collectively worth close to $3 billion, and mean that hard infrastructure such as railway line and bridges are now under development.
That's a lot of money to spend on a project that is not yet certain to go ahead, even for an industry where companies have shown a willingness to walk away from projects that have already swallowed up more than a billion dollars in preparatory spending.
BHP Billiton's Olympic Dam expansion is one example that springs to mind.
Mr Hockey prefers not to elaborate on whether the advanced nature of the works is an indication the joint venture is confident of solving its funding challenge, saying only that: "Roy Hill continues to make progress with its debt financing, interest remains high and feedback is positive.
"Our equity partners continue to provide sufficient funding for the project to advance."
Commercial banks such as BNP Paribas, NAB and others are expected to drum up about $US3 billion, while export credit agencies in nations like Korea, Japan and the United States are expected to supply the remaining $US4 billion.
It's unclear whether the debt challenge is being made harder by the legal dispute between Mrs Rinehart and some of her children, which flared again in a Sydney courtroom this week.
Back in 2011 when Mrs Rinehart was seeking to keep the battle for control of her family trust out of the public eye, her lawyers warned a Sydney court that publication of details could "unsettle" financiers and potentially delay or destroy Roy Hill.
Upon those comments coming to light in 2012, Posco instantly moved to quell the drama, declaring that it was not sufficiently bothered by the family row to back away from buying a bigger stake in the Roy Hill joint venture.
"To our knowledge, it is a row over wealth, not mining rights. The row is a separate matter and will not have a direct impact on our plan," said Posco spokesman Chung Jae-woong, shortly before the steel maker increased its stake from 3.75 per cent to 15 per cent.
The money in the family trust is not earmarked to be part of the Roy Hill financing, meaning the tension between the courtroom tussle and Roy Hill is not direct.
For many potential financiers, the decision to invest will be influenced by political issues of their own, as demonstrated in August when it emerged that US miners were lobbying against their nation's credit agency funding Roy Hill because they saw it as a foreign rival.
Ultimately, the project must prove its economic viability to secure financiers, and few industries have a more contentious outlook than iron ore, where a rising tide of supply is starting to drag down prices.
This time last year - after the iron ore price had slumped far beyond expectations to below $US87 a tonne - Credit Suisse declared that it was "very late in the cycle to be commencing infrastructure investments" and that any project that was not substantially complete had "missed out on the window of opportunity" for high prices.
Roy Hill was one of the targets of those comments, and Credit Suisse said its chances of securing finance were "looking shaky".
The picture looks more robust now after the iron ore price avoided a similar spring slump this year.
JPMorgan recently declared it expected Roy Hill to go ahead, but with a minimum six-month delay.
"In our view a debt package of that order of magnitude may be difficult to secure without a further potential sell-down of the project," JPMorgan said in a research note.
Those views accord with several of the most senior officials in the Australian iron ore industry, who have privately told BusinessDay they believe it is now physically impossible for Roy Hill to achieve its goal of exporting first iron ore in the latter half of 2015.
In the iron ore industry, delays mean the loss of a lot of money, amplified by the climate of gradually sliding prices.
Back at the Roy Hill bunker, Mr Hockey shrugs off the doubters and the rivals, noting that a firm mine-plan for the project is in place, and still achievable.
"September 2015 is certainly not an aspiration, it's a solid target," he said.
Cost: $US10 billion
Production target: September 2015
Projected annual iron ore production:
55 million tonnes
70% Hancock Prospecting
15% Marubeni Corporation
2.5% China Steel Corporation