Success comes from iron willadmin
CLIVE Palmer is a different kind of businessman. If you were told he was from the Gold Coast you wouldn’t be surprised.
Then there’s that property developer/National Party background and a truckload of cash from China in his bank account thanks to the recent sale of an iron ore project in the Pilbara to CITIC.
You never feel that you are dealing with someone who has just pulled off a $290 million plus deal with the Chinese Government and unlike many businessmen, Palmer doesn’t mind talking about his wealth.
But it wasn’t as if success came overnight. Palmer has worked on the iron ore project since the mid ’80s when he bought it off the US-based Hanna Group and there was the odd failure before the successes started to roll in.
“Projects like this don’t happen in three or four years,” he says.
“It’s a lot of hard work.”
He thought he had a deal in 1999 when he stitched together a consortium of some of the world’s biggest players to build and mine the ore and ship it to a steel mill in Newcastle. It fell apart when part of the transport route was discovered to be heritage listed and his cosy relationship with the NSW Government fell into acrimony.
The Government wanted its $30-odd million in grants returned and Palmer wanted his project. He tried to sue for $500 million.
About $140 million was also spent on engineering studies and exploration of the ore body.
“I’m still trying to resurrect it,” he says of the consortium.
Palmer also once spent $1 million trying to get the then-Soviet Russians to take iron ore from the project, but all Palmer was offered in return was a trade: for all the iron ore, the Soviets would give him an equivalent value amount in cinnamon.
When Palmer announced the putting together of his Pilbara consortium, the market and other producers laughed.
“They would, wouldn’t they,” he says.
But these sorts of deals require massive capital which is why his company, Mineralogy, took the different route with CITIC of selling the rights to mine and develop.
He took a $US215 million (then worth about $A290 million) up-front payment as well as yearly royalty of up to $US100 million.
He still has plenty of ore to negotiate over, as well. He estimates 160 billion tonnes, but that is not definitive.
The deal with the Chinese represented a small part of the strategy. He has effectively carved the ore body up into blocks to be sold off and believes the plan has a net present value of about $7 billion.
“What we have done is we have marketed 1 billion tonnes of ore which is enough to to produce 12 million tonnes of product over a 30-year period,” he says.
“We have four more of these tied up with the Chinese on the same formula.”
CITIC already has Foreign Investment Review Board approval.
Mining junior Australasian Resources is also negotiating with Mineralogy over the right to mine another 1 billion tonnes of an adjoining southern block of the ore body.
A feasibility study is expected to be completed in the next few weeks and Palmer is also now negotiating with the Indian Government.
The huge interest in his deposits stems from the stranglehold companies like BHP Billiton, Rio Tinto and CVRD hold over iron ore.
The three cleverly bought up and developed iron ore years ago and now go into negotiations with steel makers knowing that they hold the upper hand.
But China was never going to be happy with that for too long.
The $300 million Palmer received recently is not his first fortune. He says he already had about $40 million in assets, having made his first fortune in property and retired before he was 30.
But retirement was never going to suit him. Anyway, he says he was getting too fat sitting around doing nothing.
He vows he hasn’t stopped making fortunes yet andis willing to bet that he will add $400 million to his personal wealth by the end of this year.
How? He’s not telling.