Forge seeks aid from lenders as Australia mine projects dwindle

MELBOURNE, Jan 14 (Reuters) - Engineering firm Forge Group Ltd FGE.AX warned on Tuesday that miners' cutbacks on new projects and cost overruns of up to A$28 million ($25 million) on a key project for Rio Tinto had forced it to line up assistance from its lenders.

Its shares sank 16 percent after the announcement.

Hit by delays and extra costs on the West Angelas Power Station project it is working on for global miner Rio Tinto's

RIO.AX Pilbara iron ore expansion, Forge also said it would not pay a dividend this year.

"Overall market conditions remain difficult with increased competition and a general tightening of the resources market," Forge Managing Director David Simpson said in a statement.

The company said it had suffered a further A$23-A$28 million deterioration in profit and cash on the West Angelas project.

Forge, also working on Australian billionaire Gina Rinehart's Roy Hill iron ore project, said it had secured new bonding facilities to cover it for phase three of the project and is in talks with other stakeholders for their support.

"The ongoing and expected support provided by our financiers and other key stakeholders gives Forge Group the confidence to continue to trade on a business as usual basis and deliver on our current work in hand," Simpson said. ($1 = 1.1043 Australian dollars)

(Reporting by Sonali Paul; Editing by Stephen Coates)

((Sonali.Paul@thomsonreuters.com)(+61 3 9286 1419)(Reuters Messaging: sonali.paul.thomsonreuters.com@reuters.net))

Keywords: AUSTRALIA FORGE/WARNING