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Rinehart’s Hancock Skirts Reciprocity on Benefits: Judge

Billionaire Gina Rinehart’s Hancock Prospecting Pty availed benefit from a 1984 division of assets agreement with then partner Wright Prospecting Pty and didn’t reciprocate, according to an appeals judge hearing a dispute over a 3 billion ton iron ore property in Australia.

Rinehart claims a 1989 agreement to divide properties between her father Lang Hancock and Wright Prospecting founder Peter Wright, including Rhodes Ridge in Western Australia as a joint venture between the two, supersedes a 1984 accord that gave Wright the option to claim Hancock’s stake in the asset in a swap of properties.

“Front and center was the impropriety of your client obtaining the benefit under the 1984 agreement as a whole and seeking to resist the same benefit to WPPL” under the 1989 agreement, Carmel McLure, the presiding judge in Hancock’s appeal of a ruling that awarded the company’s 25 percent stake in Rhodes Ridge to Wright, said yesterday. McLure addressed her comment to Hancock’s lawyer Steven Finch, before the conclusion of a four-day hearing in Perth.

Rinehart, Asia’s richest woman, is attempting to reclaim a stake in one of the richest, undeveloped iron ore properties in the world, with Rio Tinto Group (RIO) holding the remaining 50 percent. Rio Tinto already operates iron ore mines in the region and has the infrastructure, including a railway to transport the ore to port, in place.

Reserves Ruling

The three-judge appeal panel reserved its decision yesterday, giving no indication of when it might rule on the dispute.

Wright granted Hancock its 25 percent stake in the McCamey Monster property, for example, an asset then considered of “roughly equal value” to Rhodes Ridge, because it was on the Hancock side of the ledger in the distribution of properties under the 1984 accord, Wright Prospecting’s lawyer Rod Smith said yesterday.

“Wright wouldn’t have done that if told the 1984 agreement was not effective,” Smith said. “We conveyed on Hancock the rights in their schedule as and when they asked for them.”

BHP Billiton Ltd. (BHP) acquired the McCamey property in 1992 and is building the $3.4 billion Jimblebar mine and rail lines at the site, with the intention of producing 35 million tons of iron ore annually when the mine opens in 2014, according to the company’s 2011 annual report.

‘Haven’t Complied With’

The transfers of property to Hancock weren’t done under a part of the agreement that Wright is asserting to gain control of Rhodes Ridge, Finch said.

That part of the agreement, referred to as Clause 4, was a trigger that initiated a process to transfer all the properties in the agreement, Finch said.

“There is a rule on how you acquire property and they haven’t complied with it,” Finch said, referring to Wright Prospecting.

Smith told the appeal panel earlier this week that Hancock rejected a A$65 million ($65 million) offer from Rio Tinto’s CRA Ltd. unit for Rhodes Ridge in the early 1990s, after agreeing to sell the Marandoo property in the same area to CRA for A$60 million.

Valuation of Rhodes Ridge was discussed in closed court during the original trial because it was deemed commercially sensitive, according to a 2010 ruling by Justice Michael Murray.

CRA won approval to build a A$500 million mine at the Marandoo site in the Pilbara region of Western Australia in 1992.

Rio Tinto, based in London, which produces 15 million tons of iron from Marandoo annually, said in February 2011 it planned to spend $933 million to expand the mine, extending its life by 16 years to 2030. The property has 225 million tons of proved and probable reserves, containing about 63 percent iron, according to Rio Tinto’s 2011 annual report. The Rhodes Ridge property has similar grades, according to Rio Tinto.

11-Year Dispute

Rio Tinto has been mining at Marandoo since 1994.

Rinehart’s appeal continues an 11-year dispute over Rhodes Ridge between the heirs of Hancock and Wright Prospecting founder 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. Michael Wright died in April.

Iron ore has more than doubled to $134.70 a ton as of June 14 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 $18.6 billion, according to the Bloomberg Billionaires Index.

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.

Murray had ruled Wright Prospecting is entitled to exercise its option to assume Hancock’s stake.

The appeal case is: Hancock Prospecting Pty. v. Wright Prospecting Pty. CACV 43/2011. Supreme Court of Western Australia (Perth).

To contact the reporter on this story: Joe Schneider in Sydney at jschneider5@bloomberg.net

To contact the editor responsible for this story: Douglas Wong at dwong19@bloomberg.net

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