UPDATE 2-Samsung C&T picked as preferred bidder for Roy Hill deal -sources

Wed Mar 20, 2013 3:42am EDT

(Adds comment from Roy Hill chief executive)

SEOUL, March 20 (Reuters) - South Korea's Samsung C&T Corp has been picked as the preferred bidder for a multi-billion dollar development deal for Australia's Roy Hill iron ore project, two sources with knowledge of the matter told Reuters.

Roy Hill Holdings, controlled by Australian billionaire Gina Rinehart, plans a 55 million tonnes a year iron ore mine in the Pilbara region of Western Australia, but has still to finalise $7 billion in debt funding for the project to go ahead.

"Samsung C&T and POSCO Engineering & Construction submitted bids, but only Samsung C&T was chosen as a preferred bidder," one of the sources said, speaking on condition of anonymity because of the confidentiality of the process.

The other source confirmed this, adding: "It remains to be seen whether Samsung C&T will sign a main deal."

The $10 billion Roy Hill project involves building a mine, railway and port.

Roy Hill Chief Executive Barry Fitzgerald declined to comment directly when asked by Reuters if Samsung C&T was the winner, saying the decision would be announced next week.

Roy Hill has been pushing back the timeline on securing funding and starting construction. Roy Hill had been hoping to finalise debt funding by mid-2013, but now says it could be as late as the end of 2013.

Rinehart's Hancock Prospecting owns about 70 per cent of Roy Hill Holdings, with the remainder owned by a consortium led by South Korean steel giant POSCO and including Japanese trading company Marubeni, South Korea's STX Corp , and Taiwan's China Steel Corp.

POSCO Engineering & Construction is a unit of steelmaker POSCO.

Roy Hill has been seeking a fixed construction contract in order to shield Hancock and its partners from any cost overruns during the construction phase.

Budget blowouts have become commonplace in Australia, which is regarded as one of the most expensive places to develop new mines.

Costs at the nearby Sino Iron project, owned by CITIC Pacific Ltd, have ballooned four-fold to $8 billion during the construction phase. (Reporting by Hyunjoo Jin; Additional reporting by James Regan in PERTH; Editing by Daniel Magnowski and Richard Pullin)