South Korean mine construction company takes a step back after A$1bn loss
Samsung C&T will be taking a step back in its mine construction projects, as the company lost A$1bn on a recent Western Australian project.
The South Korean company had completed work on the Roy Hill iron ore mine but is plagued with court battles including a lawsuit for A$65m in unpaid subcontracting work to the Spanish company Duro Felguera.
Samsung C&T stated that there is little market demand for mine construction projects, citing the current difficult climate in the commodities market.
The company won a US$5.6bn contract to build the Roy Hill mine in 2013.
Samsung C&T developed a processing plant to export iron ore produced from the Roy Hill mine, railroads and harbour infrastructure. The project ran over schedule and over budget, and in January Samsung C&T revealed that it would book a A$1bn loss on the contract.
In a number of court cases that the company is battling, Duro Felguera filed a lawsuit seeking A$65m payment for unpaid work at the iron ore mine.
“In total, Duro Felguera is owed well in excess of $100m by Samsung in relation to a $500m subcontract for work on Roy Hill,” said Raul Serrano, Duro Felguera operations director.
Samsung C&T said a judicial review on the payment disputes with Duro Felguera is pending and that it is taking all proper steps to resolve them in accordance with the law.
Analysts say the Roy Hill experience has eroded Samsung C&T’s appetite for mining projects.
“In the beginning, Samsung C&T was ambitious,” said Lee Kwang-soo at Mirae Asset Securities. “However in the course of working on the project, uncontrollable risks happened. So it seems difficult for Samsung C&T to expand further into mining in the future.”