Gina Rinehart, Asia’s richest woman, is attempting to reclaim a stake in one of Australia’s most valuable iron ore assets after a judge awarded the holding to Wright Prospecting Pty two years ago.
Rinehart’s appeal of the decision to strip her of a 25 percent stake in the Rhodes Ridge property, which holds more than 3 billion tons of iron ore, is scheduled to begin today in the Supreme Court of Western Australia in Perth.
The appeal continues an 11-year dispute between the heirs of Lang Hancock and Peter Wright, whose iron-ore discoveries in the Australian state in the 1950s and 1960s made Rinehart the richest person in the country and Wright’s children, Angela Bennett and Michael Wright, the 14th wealthiest, according to BRW’s Rich 200 list.
Development of Rhodes Ridge may generate A$2.5 billion ($2.5 billion) a year in operating profit for Rio Tinto Group (RIO), which owns half the project, and its joint venture partner, said Peter Strachan, a resources analyst at StockAnalysis.
“Iron ore is the new black,” Perth-based Strachan said in a telephone interview, referring to the current popularity of the commodity.
Iron ore has more than doubled to $131.40 a ton as of June 8 from $59.10 on March 27, 2009, helping Rinehart rise to the 29th spot on a list of the world’s wealthiest people with a net worth of $18.5 billion, according to the Bloomberg Billionaires Index.
Iron ore generates the most revenue for both London-based Rio Tinto and BHP Billiton Ltd. (BHP) of Melbourne. China is the largest customer for both companies, providing 31 percent of sales to Rio and 28 percent to BHP in their most recent financial years, according to data compiled by Bloomberg.
Gervase Greene, a spokesman at Rio Tinto in Perth, declined to comment on the dispute between Wright and Rinehart. Mark Bickerton, a spokesman at Rinehart’s Hancock Prospecting Pty, also declined to comment.
In his March 8, 2010, decision that stripped Rinehart of her stake in the project, Supreme Court Justice Michael Murray noted discussions of the value of the property were held in closed court during the trial because they were deemed commercially sensitive.
Rio Tinto is spending at least $15.6 billion to expand iron ore operations to meet demand from China.
The Rhodes Ridge property lies between the operating Hope Downs 1 mine and the Hope Downs 4, where Rio Tinto plans to start mining by the end of the year. The Hope Downs mines are equally owned by Hancock Prospecting and Rio Tinto.
Lang Hancock and Peter Wright, whose lifelong friendship and business relationship appeared to be deteriorating by the early 1980s according to court records, initially agreed in 1983 to carve up some of their properties, with each having the option of taking full control of their portion.
Further negotiations broke down with Hancock accusing Wright of reneging on their agreement on Dec. 30, 1984, over development of the Marandoo iron ore project in Western Australia, Murray wrote.
“As long as you insist on tying a string that prevents things going, my choice is between spending money on a hopeless cause or continuing to carry an ever-increasing burden,” Hancock wrote to Wright, with the judge citing the letter in the reasons for his decision. “This, I am not prepared to do any longer; so as far as I am concerned it means the end of doing anything together.”
Under the 1983 agreement, which was completed in 1984, properties were divided into two groups, with one including the interests in the McCarney and Marandoo Western Australia iron ore joint ventures along with coal interests in Queensland. The second group included Rhodes Ridge and limestone, chrome and base metal interests in Western Australia, with Hancock identified in the agreement as LGH and Wright as EAW.
“The note at the foot of the memo in the hand of Lang Hancock reads: ‘Agreed in principle subject to documentation with choice of list of assets to be made by EAW before the end of the week. EAW now chooses Group 1 & X, LGH to take Group 2 & Y,’’ Murray wrote in his decision.
The agreement didn’t divide up the assets, rather it provided a mechanism to do so with each party having the right to exercise an option to implement it, Murray said.
Murray ruled the agreement was a valid and effectual contract and that Rinehart’s Hancock breached it by refusing to comply with Wright Prospecting’s decision to exercise its option.
The judge rejected Hancock’s claims that the agreement wasn’t binding and that Wright wasn’t entitled to the Hancock stake in the property because its actions were legally improper -- known as having ‘‘unclean hands.”
“I do not find that the plaintiff is disentitled to equitable relief on the discretionary ground that it has breached the rule that he who seeks equitable relief must come to court with ‘clean hands,’” Murray said.
The trial case is: Wright Prospecting Pty v. Hancock Prospecting Pty. CIV1279/2010. Supreme Court of Western Australia (Perth).