Australia's richest duel: Please - we want ore

By Jesse Riseborough  |   2008-6-19  |     NEWSPAPER EDITION

AUSTRALIA'S richest man, Andrew "Twiggy" Forrest and its wealthiest woman, Gina Rinehart, are battling over the right to mine one of the nation's largest undeveloped iron-ore deposits.

Forrest's Perth-based Fortescue Metals Group Ltd said yesterday it is teamed with Cazaly Resources Ltd, which has applied for licenses over the Rhodes Ridge project in Western Australia.

Rinehart's Hancock Prospecting Pty owns the mining rights in a joint venture with Rio Tinto Group and Wright Prospecting Pty.

Shares in Cazaly, which last year failed in a court bid to win control of another untapped Rio deposit, surged 60 percent in Sydney trading after the company said it had started legal action to strip Rinehart and partners of the right to develop the project. Companies are spending more than A$18 billion (US$17 billion) on iron-ore mines in the western state as demand from China drives record prices.

"Gina and Twiggy are ultimately on the same wave, and I don't imagine they would want to be squabbling, but I guess it's a difference of opinion," Peter Arden, an analyst at Ord Minnett Ltd, an affiliate of JPMorgan Chase & Co, told Bloomberg News yesterday by phone from Melbourne. "We are looking ultimately at big prizes for getting strategic positions in the industry."

Cazaly rose 19.5 cents to 52 Australian cents at the 4:10pm Sydney close on the Australian Stock Exchange, the most since November 30, 2007, and taking its market value to A$31.5 million. Fortescue shares rose 5 percent to A$10.97 and London-based Rio, the world's second-largest iron-ore exporter, gained 3.1 percent.

"The Rhodes Ridge project is critical to our development plans," Sam Walsh, chief executive officer of Rio's iron-ore unit, said in a statement to the exchange. "Right now, we have drill rigs working at Rhodes Ridge deposits in preparation for future operations."

The company was in full compliance with agreements, the rights of occupancy are valid and the land wasn't available for mining by other groups, Walsh said. The Cazaly and Fortescue action appeared to be "an attempt to undermine security of land tenure," he said.

The iron-ore boom has caused a surge in the personal wealth of Forrest and Rinehart. Forrest is worth A$9.4 billion, a record for an Australian and up from A$3.9 billion a year earlier, according to this year's BRW Magazine's annual rich 200 list. Rinehart's personal wealth was A$4.4 billion, the magazine said. Her fortune may rise more than A$500 million annually because of the development of the Hope Downs iron-ore mine in Western Australia, BRW said.

"The iron-ore sector is hot," John Veldhuizen, a resources analyst at BBY Ltd, said yesterday. Fortescue "have obviously done their homework so it must have some basis for the claim," he said.

Cazaly lost a High-Court appeal in April seeking to overturn a lower-court decision rejecting its claims to another iron-ore deposit also owned by Rio Tinto. Cazaly initially staked its claim for the Shovelanna iron-ore deposit in 2005 and later signed a preliminary agreement with Melbourne-based BHP Billiton Ltd to sell ore from any future mine.

Fortescue is in dispute with its two larger rivals in the Pilbara, BHP and Rio, over access to existing railroads in the region to allow it to expand output faster and cheaper.

"Should Cazaly be successful in gaining exploration and development rights, Fortescue will provide development, marketing and financial assistance toward the ultimate sale of any mined iron ore from the project area," Fortescue said yesterday in a separate statement.

The state's Mining Warden will hold a hearing to consider the right to occupy the Rhodes Ridge land, Cazaly said yesterday. Rio was last year granted an extension of its tenure over the ground to December 31, 2008, it said yesterday. The legislation covering the project dates back to 1972.

"Cazaly believes that the hearing will confirm that the land is open for mining and that there is no reason why the tenement applications cannot be granted," the company said. "The land the subject of the Rhodes Ridge Project is recognized as containing one of the largest undeveloped iron ore resources in Western Australia."