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Mining equipment makers, miners clash over Roy Hill

Keywords: Tags  Roy Hill iron ore mine, Western Australia, Caterpillar, Cliffs Natural Resources, iron ore, mining equipment, Hancock Prospecting, Gina Rinehart Congress

NEW YORK — The U.S. mining equipment industry and miners are clashing over a government-backed financing plan for the development of the Roy Hill iron ore mine in Western Australia.

Peoria, Ill.-based Caterpillar Inc. said the U.S. mining equipment industry faces more than $500 million in potential lost sales if miners succeed in opposing the $650-million financing for Roy Hill, which is 70-percent owned by Gina Rinehart’s Hancock Prospecting Pty. Ltd.

Meanwhile, Cleveland-based Cliffs Natural Resources Inc., backed by senators from Minnesota and Michigan, has led objections against the loan, saying it promotes competition against U.S. companies.

Caterpillar confirmed to AMM sister publication Steel First that it has been working with members of Congress and trade associations to back the loan, which will support the development of a new 55-million-tonne-per-year iron ore mine.

"This project presents a significant business opportunity for Caterpillar to support Roy Hill with mining equipment that would be manufactured in the United States," Caterpillar spokeswoman Barbara Cox said in a statement.

Export-Import Bank of the United States (Ex-Im Bank) is considering financing that would aid the export of about $522 million in U.S.-made mining equipment to the mine, which will be used to ship iron ore to Asian steel producers.

These types of foreign investments by the Ex-Im Bank have direct competition against U.S. iron ore and steel industries, which could jeopardize domestic jobs, Cliffs said.

Most of the iron ore production supported by past Ex-Im Bank transactions is exported to China and other nations where it is turned into iron and ultimately steel, it added.

Steel produced by China and other Asian consumers of subsidized iron ore is finding its way to U.S. shores in increasing quantities and is displacing U.S. steel production, the company said, also claiming that the Roy Hill Mine would produce more iron ore than the entire U.S. mining industry did in 2012.

"Under the bank’s charter, Ex-Im is prohibited from financing projects whose production either will contribute to a structural global oversupply or will compete with U.S. production," Cliffs director of global communications Patricia Persico said.

"Roy Hill’s production will substantially injure not only U.S. iron ore producers but also cause global iron ore prices to fall by increasing the supply of iron ore. The sheer volume of iron ore production supported by Ex-Im Bank would contribute to a volatile global pricing environment for iron ore," she added.

Cliffs’ Australian iron ore operations will be in direct competition for the same consumers in Asia if the Roy Hill project goes ahead.

Roy Hill Mine representatives couldn’t be reached for comment.

A version of this article was first published in AMM sister publication Steel First.

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