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Engineering and construction firm Aerison Group has collapsed after failing to resolve a contract dispute with Gina Rinehart’s Roy Hill.

The board of the West Perth-based company has appointed KordaMentha’s Richard Tucker, John Bumbak and Craig Shepard as administrators, with a sale and recapitalisation process to begin immediately.

The administrators said their appointment followed “unsuccessful attempts” by Aerison to settle a significant claim with Roy Hill relating to a saline water reverse osmosis desalination plant, rising costs and supply chain problems.

Aerison, whose shares have been suspended since May 4, last month said it had submitted claims to Roy Hill totalling $47.5 million but flagged the number may increase subject to final review.

Mr Tucker said the dispute with the Pilbara iron ore miner had resulted in a liquidity shortfall and will be “vigorously pursued as part of the voluntary administration process”.

However, the extent of Aerison’s problems appear to be bigger than Roy Hill.

The troubled group revealed it took a financial hit from a February 2019 construction contract with BHP’s Nickel West division under recent questioning by the market operator, which quizzed Aerison on why it did not flag significant changes to contracts earlier than February 28 when it released its preliminary annual results.

Aerison suffered a net loss of $10.7m in the full-year to December 2022.

KordaMentha will meet with key stakeholders and make an urgent assessment of Aerison’s financial position to ensure the company can continue trading during the administration process.

Mr Tucker said he expected “significant interest” in Aerison and hoped to complete an early sale, noting the company’s long history of providing quality service to the Australian mining industry.

While it has been under pressure from rising costs across the board, Mr Tucker said Aerison remained a “robust” business and that Roy Hill was the “real cause of the issue”.

“At its core, Aerison is a niche player in the market with deep relationships and a loyal workforce,” he said in a statement.

“There has already been strong interest to buy Aerison with its current projects and strong pipeline of future works. We expect a competitive sale process.”

A Roy Hill spokesman said the miner had a “long established and ongoing commitment to local businesses”.

“Roy Hill notes with disappointment . . . that administrators have been appointed to Western Australian-based engineering design and construction company Aerison,” the spokesman said.

“Roy Hill’s relationship with Aerison includes many years of successful service delivery and project outcomes.”

Aerison chair Bronwyn Barnes previously told the market the company was focused on securing a positive future and had signed up tier-one restructuring, finance and legal firms to assist.

Aerison’s long-term clients include Rio Tinto, BHP, Iluka and Fortescue Metals Group. It employs about 250 people across Western Australia, mostly working on project sites.