Look out Twiggy, here comes Clive Palmer. The Gold-Coast based iron ore magnate’s plan to raise $5 billion and create a new resources group will add another chapter to this colourful businessman’s amazing career. It will also catapult this billionaire towards to the top of the list of Australia’s richest people.
According to this morning’s report in The Age, Palmer’s new vehicle, Resource Development International, will raise $5 billion (mainly from Chinese investors) and be dual listed on the Australian and Hong Kong stock exchanges. Its main asset will be a 10 billion tonne iron ore resource in the Pilbara, part of a huge iron ore resource owned by Palmer’s private company, Mineralogy.
As well as the iron ore deposit, the new company will also reportedly own a proposed nickel project in Gladstone in Queensland, a steel mill, and an energy portfolio. There is also speculation that just-retired Liberal powerbroker Alexander Downer will be appointed to the new company’s board.
More details about RDI’s float are expected to emerge over the coming days. But on face value, the plan is pure Palmer – big and very bold.
Palmer was valued at $1.5 billion on this year’s BRW Rich 200, but it’s a very conservative estimate, based mainly on a deal whereby Chinese company CITIC bought the rights to mine two billion tonnes of Mineralogy’s iron ore, with an option over a further four billion tonnes. Palmer has also sold the rights to one billion tonnes of iron ore to Australasian Resources, a company in which he owns a 69 per cent stake worth around $500 million.
But these sales represent only a small slice of Mineralogy’s total iron ore resource, which is estimated to be somewhere between 60 and 100 billion tonnes. Valuing this ground is extraordinarily difficult, although the float of RDI will help the market understand just how much Mineralogy – and Palmer – are actually worth.
Palmer is no stranger to wealth. Palmer studied journalism and served as a political reporter for the University of Queensland’s newspaper, but gave up his studies and entered the world of Gold Coast real estate.
After making a small fortune, he retired at the tender age of 29. After a spot of travelling and a stint as media manager for Sir Joh Bjelke-Petersen’s all-powerful Queensland National Party, Palmer got tired of the good life and started his business comeback.
In the mid-1980s he started three companies in the areas of oil trading, R&D and mining. Palmer snapped up the assets of two American companies that were pulling out of Australia, including the iron-ore tenements in the Pilbara that would become the key assets within Mineralogy.
Palmer has never lost the taste for the good life. He owns a private jet, dines with heavyweights such as John Howard, Ted Kennedy and Vladamir Putin, has pumped a fortune into an extensive harness racing stable and recently emerged as the backer of the Gold Coast’s proposed A-League soccer club.
But he balances this with an extraordinary sense of generosity. Earlier this year, he announced he would spend $100 million to set up a charitable foundation focused on funding medical research in Western Australia and assisting indigenous communities in the Pilbara.
It will be interested to see how Palmer’s float plans for RDI are received by the wider market. While investors are crazy for anything to do with iron ore – just look at Fortescue’s amazing rise over the last 12 months – there will be no shortage of commentators ready to point out that Palmer’s tenements are rich in magnetite, a form of iron ore that has long been thought inferior to haematite, the form of iron ore mined in great quantities in the Pilbara by BHP Billiton and Rio Tinto.
The critics are unlikely to worry Palmer too much. The support of CITIC will hold a lot of sway with Chinese investors who know only too well how desperate local steel mills are for iron ore, even if magnetite usually needs to be upgraded before use in steel production.
Clive Palmer’s reckons the size of his fortune has always been seriously underestimated. After this deal, that won’t be the case for much longer.
ARH Price at posting:
0.0¢ Sentiment: LT Buy Disclosure: Held
