Cormorant: FMG, Rio and BHP's massive expansions do reflect...

Cormorant: FMG, Rio and BHP's massive expansions do reflect their confidence that hematite will be economic to mine at lower long term iron ore prices. This is not the case with magnetite.

In relation to the CITIC project - Clive did NOT play a "large hand" in its development. He sold a "right to mine" to CITIC in exchange for a royalty.

On that note most estimates of Clive's wealth uses the CITIC transaction as a benchmark, multiplied by his estimate of the amount of magnetite resource he has pegged. This is a flawed analysis for the following reasons:

- the CITIC transaction was done at the top of the market, in a spate of Chinese driven transactions desperate to secure ore at any cost. This is unlikely to be replicated.

- the transaction was executed prior to a flood of cost blowouts and technical issues with various other magnetite developments entered into around a similar time. Lesson learnt - magnetite is not as easy to develop as the resource owners say.

- various magnetite transactions were done in an environment of much lower capital and operating cost. Everyone knows about the capex issues (which are unlikely to abate) but labour cost escalations since then have also been astronomical.

- the CITIC transaction was widely regarded to include a large premium for the opportunity to develop and control the port.

- the rest of the magnetite resource may not be economically developable and he is unlikely to be able to sell them all, or even any more than he already has sold.

If you strip out his magnetite "wealth" Clive may barely scratch the billionaire mark. Most of his other projects are tiddlers in comparison, or have been talked up but are as yet of no substance. Remember that the Chinese are fond of entering into "Memorandums of Understanding" - which as many others have found are highly non-binding.

Clive is like many others, a real estate magnate. He has pegged a large number of tenements nobody else wanted (decades ago) and is now attempting to monetise them, rather than develop them. That is his end game and ARH is one of many avenues he is attempting to use to do so. If one of the other options (Resourcehouse or direct resource sale) suits better then ARH can be ditched quite easily. He flipped a real estate fortune into one significant transaction which got him $400m or so, before tax. This is the money he is reinvesting in attempting to sell off the rest of his "resource" before anyone realises how low quality they are. As you can see by his lack of success, unfortunately for him, interested parties are actually doing some decent due diligence and subsequently walking away. Big warning flag IMO.

It is a legitimate way to build a fortune and he is doing well out of it. It would however be naive to expect him to prioritise shareholders over his own self interest.

Jimmy: Good link to the discussion on top stocks. It raises many of the same issues I've found. Definitely worth a read!

WW2Z: See comment two paragraphs above. If CP ever raises enough funds to develop ARH the minority shareholders will be so diluted as to be insignificant.

You are also assuming that the Chinese need ARH to do a deal. Not really. CITIC is developing 2bt and has rights to a further 6bt, accessible without developing heaps of infrastructure like ARH will have to.

It is much simpler for another Chinese party to do a deal with CITIC than with ARH. I suspect you will see the deals continue to fall over for that reason, unless ARH has some sort of carrot to offer.

This is just my opinion and happy to be proven wrong. However I found generally that the way these assets and deals have been spruiked is a warning sign. This is reflected by the often one sided discussion on this board and so I wanted to trigger some constructive discussion to see if any information of substance can be found.

Please don't take this as downramping. For example, to be balanced I do not feel that there is a very high risk of CP taking back the right to mine, unless the company becomes insolvent. (which he has control over anyway)