AFRGina Rinehart’s Hancock Prospecting has pocketed almost $2.14 billion in dividends from its Roy Hill iron ore mine in the Pilbara in recent months, fuelling the billionaire businesswoman’s spending spree on lithium stocks.
Hancock said late on Friday that built an 18 per cent stake in Azure Minerals, putting in the box seat to decide the fate of a $1.63 billion takeover offer for the West Australian lithium explorer from Sociedad Química y Minera.
Hancock is now on the cusp of being able to scupper the first part of the Chilean group’s two-pronged plan to acquire Azure, but indicated it was satisfied with a strategic 18 per cent stake and aiming for a partnership arrangement alongside SQM.
SQM, already in partnership with Wesfarmers in a major WA lithium project, has said it will abandon its deal for Azure if any single shareholder accumulates a 19 per cent stake and instead consider an off-market takeover.
The aggressive push into lithium comes as Mrs Rinehart and her executive team, armed with a huge war chest, look long-term to life beyond the significant cashflow being generated by Roy Hill.
It is estimated there is less than 10 years of life left in Roy Hill, the source of most of Mrs Rinehart’s wealth and by far her largest mine, unless Hancock can tap into satellite deposits or starts to process low-grade stockpiles.
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$117.730 0.05%View RIO related articlesOct 22May 23Oct 2375.000105.00135.00Updated: Oct 27, 2023 – 6.15pm. Data is 20 mins delayed.Hancock Prospecting’s Roy Hill iron ore mine has delivered a $2.7 billion profit in the last financial year.
Roy Hill paid $2.25 billion in dividends to its owners in the year ended September 30, and an additional $800 million this month.
The wealthiest Australian is now casting a big shadow over SQM’s bid for Azure and its Andover project in WA’s Pilbara.
Hancock talked up its history of developing major projects and track record as partner in mining and other industries on Friday in confirming it was now the second-biggest shareholder in Azure behind SQM.
“Consistent with early-stage projects that are pre-resource, while Andover shows good prospects, it has a long path and significant risks to navigate before its ultimate potential is known,” Hancock said in a statement. “Hancock has a history of successful domestic and international partnerships across resources and agriculture … those businesses have benefited from the collective skills and expertise of the partners.”
The commentary is similar to that from Hancock when it was building up a 19.9 per cent stake in Albemarle takeover target Liontown Resources.
Mrs Rinehart, Hancock’s executive chairman, outlaid more than $1.3 billion in share market raids to build a 19.9 per cent in lithium play Liontown by October 11. The stock plunged after New York-listed Albemarle walked away from a $6.6 billion takeover proposal.
Azure shares continued to change hands in big volumes on Friday. Before Thursday, the average daily volume of Azure shares traded was less than 5 million, but more than 80 million shares changed hands on Thursday and more than 20 million were traded on Friday. That means more than 22 per cent of the company has changed hands in the past two trading sessions
Azure shares rose 2¢ to $3.51 in afternoon trade.
Roy Hill said its net profit fell to $2.7 billion from $3.16 billion in the previous year despite shipping a record 63.3 million tonnes of iron ore. The profits from the flagship mining operations have tailed off since hitting $4.4 billion in 2021 at a time of sky-high, iron ore prices.
Roy Hill dividends are shared among equity partners: Hancock with a 70 per cent stake, Marubeni (15 per cent), POSCO (12.5 per cent) and China Steel Corporation (2.5 per cent). That would make Hancock’s share of the recent $3.05 billion dividend pool about $2.14 billion.
Capital expenditure topped $800 million as Roy Hill boosted its fleet of driverless haul trucks, committed to an upgrade of accommodation and facilities at the mine and added ore processing capacity.
Hancock’s Atlas Iron operations reported a $401.2 million profit on Thursday and delivered a $225 million of dividend to its owners.
Mrs Rinehart sits atop the Financial Review Rich List with an estimated fortune of $37.4 billion thanks to the success of Roy Hill. The operation generated enough cash to pay down a $10 billion debt after just five years in operation, and declared a maiden dividend of $475 million in 2020.
Roy Hill said it paid $605 million in West Australian government and native title royalties in the financial 2023, along with a further $1.4 billion in corporate tax payments at an effective tax rate of 30 per cent.
“This highlights the significant contribution Roy Hill continues to make at a time when government debt remains at record levels and revenue is needed to fund critical services including defence, police, and emergency services, plus assist the growing proportion of elderly and those who have served our country,” the company said.
Mrs Rinehart moves to insert herself into Liontown and Azure takeovers come as she builds stakes in smaller lithium exploration companies.
She has also signed an agreement to supply lithium to India, while Hancock has secured exploration leases over huge tracts of land in WA where there are known lithium deposits. The investments, estimated to total well over $2 billion, have coincided with Hancock raising concerns about the Roy Hill mine life and its iron ore partnership with Rio Tinto.
“Roy is estimated to have a mine life left of only approximately 10 years. There is potential if more investment, and if further regulatory hurdles and approvals are achievable, for this to be extended,” Mrs Rinehart said in a speech to the Queensland Resources Club earlier this year.
Hancock wants Rio Tinto, also a lithium aspirant in WA where it has taken up exploration ground covering more than 145,000 hectares, to open new iron ore mines under a long-standing partnership in the Pilbara.
The Hope Downs partnership between Hancock and Rio so far involves the Hope 1, Hope 4 and Baby Hope mines in the Pilbara.
Hancock is pushing for the Hope 2 project along with Hope 3, 5 and 6 developed sooner rather than later but warns Albanese government policies and overlapping state and federal approvals are a barrier to investment as Rio pins its hopes on the Rhodes Ridge project in the Pilbara and the Simandou project in the African nation of Guinea.
On Friday, Mrs Rinehart said restrictive state and federal government policies and excessive environmental regulation was threatening mining investment. “We are currently battling onerous, time-and-money-consuming regulation with overlapping approval processes and other damaging policies all of which put a brake on investment and business development, and choke business with government tape,” she said.
Rio Tinto warned on October 9 that it will need to ship more low-grade iron ore over the next few years as it grapples with bringing the next generation of Pilbara mines into production.
Rio’s iron ore boss, Simon Trott, said mining approval times in WA had blown out by between 12 and 18 months since 2018, in a reflection of the greater emphasis on environmental, social and governance standards. The average environmental approval time is four years, the company says.
Wright Prospecting recently reported a $235.5 million profit in the last financial year and dividend payments of $238 million and $31 million. Wright income included $163 million from mining royalties and $201.4 million from its share of Hancock-Wright partnership.
AFRGina Rinehart’s Hancock Prospecting has pocketed almost $2.14...
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