The West

Gina Rinehart's giant Roy Hill project is within days of announcing its preferred engineering and procurement contractor, with industry sources suggesting the mining magnate is set to snub a tender submitted by companies associated with her equity partners in the project in favour of a cheaper bid.

Sources say a joint venture between Korea's POSCO E&C and STX Corp has all but shuttered its Perth office in anticipation of losing the contract, recently repatriating senior staff to Korea, along with the last of its workers dedicated to work on Roy Hill.

POSCO E&C is a majority-owned subsidiary of Korean conglomerate POSCO which, like STX, is a minority investor in Roy Hill.

A spokesman for Roy Hill yesterday confirmed that final bids for the contract were received on March 8 and that the company was running the numbers over its preferred option.

He would not comment on rumours POSCO and STC had lost out to a rival bid, heavily tipped to have been lodged by Korean rivals Samsung.

"We can confirm that we received final bids from two world-class EPC delivery providers on March 8 - this was for a fixed-price single EPC wrap which will provide certainty and security for our investors," the spokesman said.

"In accordance with the agreed procedures we are currently undertaking a due diligence evaluation of the preferred bid. The determination to award has not yet been made."

Winning agreement for a fixed-price contract is expected to help Mrs Rinehart in negotiations over debt funding for the project, as the successful contractor will carry the risk of cost blow-outs and delays, helping allay the concerns of bankers.

The EPC contract was expected to be announced late last year, but Roy Hill delayed the process and sent bidders back to the drawing board to find additional savings.

With almost $3 billion spent or committed on the 55 million tonne per year mine, the EPC contract is expected to top $6 billion.

It is unclear whether losing the contract could affect POSCO and STX's commitment to the project. POSCO owns a 12.5 per cent stake in Roy Hill and STX holds 2.5 per cent, but neither has yet fully paid over their equity contribution.

An announcement on the Roy Hill contract is expected this week. IRON HAND $10b The estimated value of the Roy Hill project

The West Australian

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