RINEHART WORLD’S RICHEST WOMAN
Posted by Ram Kumar Shrestha on June 2, 2012
Australian mining magnate Gina Rinehart is the world’s richest woman, parlaying a family fortune into vast wealth that may have put her on a trajectory to become the world’s richest person.
- RELATED LINKS
- The list – BRW Rich 200 2012
- Who’s in: You must be new here
- Who’s out: The rich get poorer sometimes
- Full list: Australia’s wealthiest families
In a stunning feat for the intensely private businesswoman,BRW’s 2012 Rich 200 calculates that Rinehart has overtaken Walmart heiress Christy Walton to cement her place among the world’s wealthy elite.
According to the Rich 200, out on Thursday, Rinehart’s personal fortune has swelled to $29.17 billion, eclipsingWalton’s $US25.3 billion ($25.89 billion) net worth – as calculated by Forbes magazine – and knocking the American off a perch she has held for seven years.
All the more impressive, it was only a year ago that Rinehart catapulted herself to the top of Australia’s rich with a mining fortune of $10.3 billion, the first time an Australian’s wealth had ever been calculated at more than $10 billion.
Rinehart’s rise has her threatening the lower rungs of Forbes’ 10 richest people in the world and validates views among some that the Perth-born billionaire could one day challenge the likes of Mexico’s Carlos Slim Helu and Microsoft’s Bill Gates, who are valued at $US69 billion and $US61 billion respectively.
But the path to fabulous riches as not been easy.
When Rinehart, 58, famously told her father’s biographer that nothing would stand in the way of the House of Hancock, she was making the point that Hancock Prospecting was her destiny and anyone – or anything – that got in her way would do so at their peril.
Rinehart was 25 when she fired the warning shot.
Fast forward to today and her fighting words have taken on a new dimension as she wars with three of her four children, who are seeking to remove her as trustee of a trust that owns almost one-quarter of Hancock Prospecting with a potential value of more than $7 billion.
As her wealth has multiplied by about 40,000 per cent, according to her lawyer, Paul McCann, in a statement on May 10, the litigation is mounting.
But it is the dispute with her children that has captured the public’s attention and caused Rinehart the most angst. It has also put one of the most media shy – and possibly one of the most impenetrable – billionaires back in the headlines after more than seven years of remaining largely free from the unwanted attentions of the media.
Rinehart this time is facing off against her children instead of her father Lang Hancock, her stepmother Rose Porteous, mining giant BHP Billiton or the family of her father’s business partner, Peter Wright.
What has made the feud even more tantalising is Rinehart’s attempts in the NSW Supreme Court and Court of Appeal to block the media from reporting any details of the latest set of skeletons hanging in the closets.
The legal action brought to light ructions that have festered in the family for years. On the surface is a legal move by three of the children, Hope, Bianca and John, to remove her as executor of a trust that holds almost 25 per cent of Hancock Prospecting, a company set up by her father in 1955. Deeper down it is about the Hancock dynasty, the third generation and the issue of succession. It is a fight that has pitted the children against their mother and younger sister, Ginia, over trust, power and money.
It is also about control and no matter what happens, the constitution protects the House of Hancock as the ownership of shares in the company must remain with Rinehart and her lineal descendants. This means the children cannot sell their shares to outsiders or leverage them. But Rinehart isn’t taking any chances.
On May 9 in an attempted resolution, she changed the vesting date of the trust from 2068 to April 2012 and gave up discretionary power to distribute trust money among the children in unequal proportions, two issues at the heart of the dispute. She then had her lawyers issue a statement questioning any need for the case to continue, “unless they wish to cause more problems for Mrs Rinehart or Hancock Prospecting Pty Ltd (HPPL) for other agendas”.
Nevertheless, the fight goes on. Her three oldest children will continue the legal action to remove her as trustee and to get access to the trust’s financial records.
Against this backdrop she is fighting another generational battle, this time with the Wright family and the various agreements struck between her father and Peter Wright. The writ, filed by Michael Wright and his sister Angela Bennett in 2001, contest Rinehart’s claim to a 25 per cent stake in the Rhodes Ridge deposit near the town of Newman, which contains an estimated 2 billion tonnes of high-grade iron ore. In 2010, the court ruled that the 1984 agreement entitled the Wright family’s Wright Prospecting business to a 50 per cent share in the tenement. The judge ordered Hancock Prospecting to “take all necessary steps and execute all necessary documents to transfer the benefit of the Rhodes Ridge interest” to Wright Prospecting. The decision is being appealed.
Michael Wright died in April but in one of his final interviews, he said the family members would fight for what they believed was rightly theirs. He also said he and his sister had filed a summons in the commercial division of the Supreme Court of Western Australia claiming rights over royalty payments from Hope Downs.
“This is a litigation where we believe we have the same basic arrangement on royalty payments, which [Rinehart] has refused to acknowledge,” Michael said. “The concept between the two old fellas was that if either one of them develop[ed] anything, they would pay each other a royalty. That concept is expressed in terms of our written partnership agreement.” And there are potentially more claims. “We look like having another one on coal reserves in Queensland but we’ve got to be careful if we mention that because I’m not dead sure that’s right. We’re looking into it. But I think the Hope Down’s one’s OK.”
To win the Rhodes Ridge case, which is yet to produce iron ore and generate a profit, is a great victory but if Bennett and Michael Wright’s children test the courts to see if they are eligible for a stake in a producing mine, the implications may be profound.
And as the mining boom keeps spitting out millionaires and billionaires, Rinehart will need to prepare for a new battle: the Aboriginal landowners who are becoming incensed at what they consider the double standards over royalty payments. There is growing resentment at the payment they receive compared with the 2.5 per cent royalty payments Wright and Hancock received in the pre-native title agreement days of the 1960s from Rio Tinto.
The chief executive of Yindjibarndi Aboriginal Corporation in the north-west of Western Australia, Michael Woodley, asks, “How come native title doesn’t give us the same riches?
“It’s all down to a piece of paper that was written by the colonial masters that stole our country and it is all agreed upon. We don’t agree with that. We are standing up. We are in a mining boom and these people are getting very rich.
“Although we don’t have any agreements with Rinehart, the 2.5 per cent she receives we use as a benchmark. Her royalty payment is something we move towards. What people don’t realise is the land is our heritage. Our culture is impacted when we grant mining leases to companies.”
And so it goes on. The legacy of old contracts are being re-examined and the government and unions are looking at ways to take their pound of flesh. Old contracts became an issue last year when Perth businessman Stan Perron launched a legal case over the size of royalty payments he had been receiving from Hancock Prospecting and Wright Prospecting. That stoush will be heard in the courts this week and may be worth tens of millions of dollars – or more.
After bringing her father’s business back from the brink, Rinehart has risen like a phoenix from the ashes and has divided the nation with her calls for radical economic and political change.
Her comments triggered an explosive reaction from federal Treasurer Wayne Swan who recently referred to her and a few other billionaires as “that tiny 1 per cent, or even 0.1 per cent, who are trying to drown out the others, who are blind to the national interest and who pour their considerable personal fortunes into advertising, armies of lobbyists, dodgy modelling and corporate and commercial manoeuvring designed to influence editorial decisions.” In an essay in The Monthly magazine, Swan wrote: “I fear Australia’s extraordinary success has never been in more jeopardy than right now because of the rising power of vested interests. This poison has infected our politics and is seeping into our economy.”
It was her fighting spirit that she used to bellow “axe the tax” from the back of a flat bed truck in 2010 against the then Rudd government’s proposed mining tax. And it was behind her promotion of climate sceptics Christopher Monckton and Ian Plimer as the carbon tax reared its head.
The mining tax was diluted, Rudd was sacked, but the growing enmity towards the rich getting richer and what to do about it culminated in the ACTU calling on unions to vote at the ACTU’s national policy congress on May 12 to make the rich pay a minimum tax on their incomes regardless of how they are derived. “Because most of their income comes from investments, billionaires like Rinehart, Clive Palmer and Andrew Forrest pay a much lower proportional tax rate than the average Australian family,” ACTU assistant secretary Tim Lyons told the media. The aim was to introduce a policy requiring those earning more than $US1 million a year to pay at least 30 per cent in taxes.
Rinehart is now one of the richest and most powerful people in the world but this is just the beginning. Her vast quantities of iron ore and coal have set her on a course to become the richest person in the world and she will do everything to ensure it happens.
with Ben Woodhead
| Andrew HeathcoteA number as large as $29 billion warrants some explanation. BRW’s valuation of Gina Rinehart is completed entirely with publicly available information. She is difficult to value given her wide range of mines, which are at various stages of development. But the process is aided by her propensity to partner with, and sell stakes to, large and reputable international companies.
The big increase in her wealth this year is partly due to the acquisition earlier this year by a Japanese company and two South Korean companies of a combined 30 per cent of the nascent Roy Hill 1 mine. The acquisitions provide Rinehart’s Hancock Prospecting with $3.2 billion to help develop the Pilbara-based iron ore project and give it an implied value of $12.8 billion. Previously, it was given a zero valuation.
The Hope Downs 1 project, also in the Pilbara, is a joint venture between Hancock Prospecting and mining giant Rio Tinto. Taking its annual iron ore production listed in Rio Tinto’s annual report and multiplying it by the iron ore price (we used $US144.73 a tonne) gives estimated revenue. Rio Tinto’s profit margin for its iron ore business, also taken from the annual report, is then applied to come up with an annual net profit and a price-earnings ratio of 10.2 (determined by assessing competitors and discounted to ensure its conservatism) to provide an estimated value of $19.4 billion. This suggests Rinehart’s 50 per cent stake in Hope Downs 1 is worth $9.7 billion.
Neighbouring joint venture Hope Downs IV is also being developed by Rio Tinto. It is expected to produce 15 million tonnes of iron ore a year and production is expected to start in 2013. A similar method is used to determine its value and the value of Rinehart’s 50 per cent stake ($3.1 billion).
The Hamersley Iron royalty stream is generating large sums for Rinehart (about $182 million a year). This is paid by Rio Tinto and is in perpetuity. She also has a big stake in the Nicolas Downs mine (a joint venture with Mineral Resources). Her stake in this manganese project is determined by assessing annual tonnage, the manganese price as well as industry profit margins and earnings multiples (estimated value to Rinehart: $262 million).
Then there are Rinehart’s coal projects in the largely undeveloped Galilee Basin in Queensland where she has an $8 billion joint venture with India’s GVK.
Apart from relatively small stakes in Ten Network and Fairfax Media, Rinehart also has access to several other mining sites that remain undeveloped and this leaves scope for her wealth to grow much larger than the lofty level it has already reached.