Rinehart Says Disclosing Finances Hurts Negotiations
Gina Rinehart, Asia’s richest woman, is fighting an Australian regulator demanding financial records of her closely held company, widening efforts to maintain her privacy after losing a separate battle with her children.
The Australian Securities & Investments Commission ordered Hancock Prospecting Pty to submit 2010 financial statements on Aug. 9, more than a month after they were due under the Corporations Act, according to correspondence obtained by Bloomberg News under the Freedom of Information Act.
The move by Rinehart, whose net worth is estimated at $18.2 billion according to the Bloomberg Billionaires Index, came in the midst of a family dispute over control of a trust that holds almost a quarter of the voting shares of Hancock, an early developer of Australia’s iron-ore mines. While Rinehart fought three of her children to the country’s highest court in an unsuccessful bid to keep details of the spat secret, the children are still pressing for the trust’s financial details.
“There are some sensitivities with respect to lodging the accounts in the context of the current matter involving Hope Downs in the courts,” David Clarke, a partner at HWL Ebsworth Lawyers representing Hancock, wrote ASIC in a Sept. 11 e-mail.
Hope Downs is Hancock’s mining venture with Rio Tinto Group. (RIO)
Hancock had promised to pay a minimum of 25 percent of the cash flow after tax and interest from Hope Downs to the Hope Margaret Hancock Trust, according to documents filed in the children’s lawsuit. The first distribution was to have taken place in January. Filing Hancock’s financial statements with ASIC won’t impact the outcome of the case, Clarke wrote.
Hancock obtained a report from Lonergan Edwards & Associates Ltd. that said public disclosure of financial statements, combined with releases by Rio Tinto, will enable the calculation of the average selling price, cash cost and profit margin at the operation. Perth-based Hancock appealed ASIC’s order to submit the financial statements and a preliminary hearing before the Administrative Appeals Tribunal is scheduled in the West Australian city June 13.
“Compliance with the financial reporting requirements would be an unreasonable burden,” Tadeusz Watroba, a director at Hancock, referred to as HPPL in the correspondence, wrote to ASIC in an Oct. 11 letter. “It will allow customers, competitors and suppliers to use the information disclosed to HPPL’s competitive disadvantage.”
Mark Bickerton, Hancock’s information manager, and Gervase Greene, a spokesman for Rio Tinto, declined to comment.
ASIC declined to comment on discussions with Hancock beyond an April 5 media release that said relief for Hancock to lodge statements had been denied and the matter was going to be heard by the Administrative Appeals Tribunal.
“ASIC has no further comment to make,” the regulator said in an e-mail today.
Australia’s Corporations Act requires all large proprietary companies, typically those with revenue of more than A$25 million ($24.4 million) or at least 50 employees, to prepare an annual financial statement and a directors’ report for submission to ASIC. The law requires companies to submit documents within four months of the end of the financial year.
Hancock wrote to ASIC on March 8, 2011, to say it was a large proprietary company and was seeking “relief” from the requirement to lodge accounts, according to a fax from the mining company released in the documents to Bloomberg News.
Request for Exemption
The company supplied financial statements to ASIC on the condition they not be disclosed. They were returned to the company, according to a Nov. 24 e-mail released by the regulator to Bloomberg.
Rinehart’s company, which was founded by Gina’s late father, Lang Hancock, said in the exchange of letters that a section of the Act provided for a “grandfathering,” which exempted private companies from filing the statements.
“HPPL has always been 100 percent owned by private entities controlled directly by Mr. Hancock and Mrs. Rinehart,” Watroba wrote. “In much the same way as other private family groups in Australia who do not lodge their financial statements with ASIC due to the grandfathering provisions.”
Hancock’s negotiating position would be affected by public disclosure of its accounts amid a decline in iron ore prices and weaker steel markets, HWL Ebsworth’s Clarke said in the Sept. 11 e-mail.
Reasons of Competition
“In a climate of increasing supply, higher production levels globally and falling prices, there is an increasing likelihood that customers will seek to adopt other less favourable means of pricing,” he wrote. Clarke didn’t respond to a request for further comment.
The Hope Downs mine, 100 kilometers (62 miles) northwest of Newman in the state of Western Australia, has the capacity to produce 31.4 million metric tons of iron annually, according to Rio Tinto. The mine began operation in 2007.
The majority of Rinehart’s fortune is held in Hancock, which owns stakes in some of the biggest coal and iron-ore mining projects in Australia and holds rights to royalties on revenue Rio Tinto gets from some of its Hamersley iron mines. Rinehart is also a shareholder in Ten Network Holdings Ltd. (TEN) and Fairfax Media Ltd. (FXJ)
Hancock last filed its financial statements with ASIC on Dec. 24, 2010, citing profit in the year ended June 30, 2009, of A$225 million on revenue of A$738 million.
Dispute Over Trust
Gina Rinehart is fighting the lawsuit by three of her children who have accused her of abusing her role in administering a multibillion-dollar fund and have sought to have her removed as trustee. Rinehart’s youngest daughter, Ginia, has said the claims showed the greed of her siblings and has sided with her mother.
Hancock’s chief financial officer, Jay Newby, had proposed to change contributions to the children’s fund from a share of Hope Downs’ cash flow to a fixed quarterly dividend, according to a Sept. 4 e-mail to Hope Rinehart Welker, the youngest of the three children suing their mother.
The fixed dividends would be paid, “in order to provide the beneficiaries with some certainty of income,” according to the e-mail.
Bianca Rinehart, who had sought accounting of the trust, was told by Hancock’s Newby she could have the trust’s financial statements provided she agreed that would be the last request for trust information, according to court filings.
The children’s lawsuit is Hope Rinehart Welker v Gina Rinehart. 2011/285907. New South Wales Supreme Court (Sydney).
To contact the reporter on this story: Joe Schneider in Sydney at firstname.lastname@example.org
To contact the editor responsible for this story: Douglas Wong at email@example.com