Rinehart Ignores Falling Price To Invest $800 Million In A New Mine

Australia’s richest person, iron ore billionaire, Gina Rinehart, has dismissed investor concern about the falling price of the steel making material by signing up for her half-share in a new $1.6 billion mine.

With long-term corporate partner, the mining giant Rio Tinto, Rinehart will develop the Hope Downs No.2 and Bedded Hilltop deposits in the Pilbara region of Western Australia.

The new pits will produce 31 million tons of high-grade iron ore a year from 2027.

Rinehart’s $800 million share of the capital cost will be provided by profits from her existing iron ore operations which last year contributed the lion’s share of the $3.6 billion profit made by the family company she controls, Hancock Prospecting.

Named after her father, the late Lang Hancock, the company helped pioneer iron ore mining in Australia which has grown into the country’s most valuable single export thanks to China’s demand for steel.

The latest joint venture deal with Rio Tinto continues an association which dates back to the 1960s when Lang Hanock took his iron ore discoveries, made close to a family farming property in the Pilbara, to the big miner, securing a permanent royalty from future developments in their joint venture area.

Rinhart has leveraged her income from the royalty into Australia’s biggest privately-owned business which last financial year generated $9.4 billion in revenue thanks in part to a strong iron ore price which averaged more than $100/t, peaking at $140/t.

Below $90/t And Falling

The current financial year, which ends next week (June 30) will probably be so successful with the iron ore price falling from a peak of $112/t to last sales at $94/t and forecast to drop below $90/t as China’s steel demand slips and new mines in Africa start production.

The biggest new African mine is the Simandou development in Guinea in which Rio Tinto is a leading investor.

Both Rinehart and Rio Tinto are confident that their new Australian project will be competitive with African mines on cost and quality, while holding a transport advantage because sailing time for a bulk cargo carrier is three weeks longer from West Africa then from Western Australia.

Rio Tinto said earlier today that all government approvals had been received for the Hope Downs No.2 project which is the latest in a series of relatively small new mines designed to maintain the company’s annual Pilbara production at between 345m/t and 360m/t a year.

Earlier this month, Rio Tinto opened the 25 million ton a year Western Range mine and approved the development of the Brockman Syncline No.1 mine.

Chief executive of Rio Tinto’s iron ore business Simon Trott said that over the next three years it was planned to invest more than $13 billion in new mines and mining equipment.

After a period of small mine developments Rio Tinto is planning to develop the big Rhodes Ridge mine with Rinehart into a 40 million ton a year project.

The current portfolio of mines and those planned will ensure that Rinehart’s Hancock Iron Ore business will remain one of the world’s leading suppliers of to the global steel industry.