Forge stronger on Roy Hill momentum

SHARES in Forge Group spiked 70% yestterday after the contractor confirmed it would proceed with phase 3 works in its $1.5 billion engineering, procurement and construction contract at the Roy Hill iron ore project in Western Australia.
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Roy Hill from the air

Justin Niessner

The share movement prompted a price query from the Australian Securities Exchange and a replay from the company pointing to the project as its largest contract.

It followed another price query from the ASX last week when Forge shares jumped 25% with only a December 17 announcement on North American works as explanation.

Formal notification to continue under the Roy Hill contract was delivered today by lead contractor Samsung C&T for works at the site’s processing facility.

Under the contract, Forge and Spanish contractor Duro Felguera will carry out works including construction of a 55 million tonne per annum plant and all detailed structural earthworks, foundations, steelwork, mechanical equipment, plate-work, piping, electrical equipment, instrumentation and controls, cabling conveyors and in-plant roads.

The value of the contract to Forge is about $830 million.

At its peak, the project will employ a workforce of up to 1300 people and construction is expected to be fully completed by September 2015.

Forge managing director and chief executive David Simpson was upbeat about continuing with the next phase of works under the contract.

“This is a pleasing development for Forge Group and underpins our order book for the remainder of FY2014 and into 2015,” he said.

“It is also encouraging to note that the Roy Hill project is progressing to schedule and that we have now commenced mobilisation to site.

“We will continue to update shareholders on the progress of this important project and other EPC and asset management projects as they progress.”

Other recent contracts awarded at the project include a six-month deal with Action Drill & Blast for rail works and a $37.5 million contract for construction of diesel fuel infrastructure with Decmil Group.

Earlier this month, a US bank conditionally approved a $US694.4 million ($A779.7 million) loan for the project and a Korean bank was reported to have agreed to provide $1 billion in funding.

Gina Rinehart-owned Hancock holds 70% of the project with a consortium of Asian investors led by Korea’s POSCO holding the balance.

The project is set to produce 55Mtpa of iron ore, with the partners targeting first production in 2015.