logo
Sign in or Register

Already a member?

Sign in

Or sign in with your account on:

Not a member yet?

Register
    

 

Equities – Your destination to connect with the growth investment community.

Clive Palmer and the Sino Iron Project: the Disaster that Keeps on Giving

By  +Follow September 19, 2013 2:52AM
Share:
Tickers Mentioned:

When reading about Australian multi-millionaire Clive Palmer, one could perhaps be forgiven for receiving the impression that the man is an Australian version of Donald Trump.

Indeed, the mining tycoon-cum-politician is often described, by himself and others, as a successful businessman who has made a fortune from a number of shrewd moves in Australian hard commodities, particularly through his Mineralogy Pty Ltd.’s holdings in coal, nickel, and iron-ore. For what it is worth, Forbes Magazine estimates the 59-year old’s fortune at just shy of a billion dollars.

But Palmer’s very public and frequently bizarre outspokenness, especially when it comes to personal beef with various rivals, is also a significant aspect of the mythology that surrounds the man.

It doesn’t help matters that his performance during these high-profile incidents often takes on a distinctly unsavory quality. For instance, only two weeks ago, Palmer threatened to sue Rupert Murdoch, whose newspaper The Australian published a piece questioning just about every aspect of the man’s claims about his own success. The article’s author unequivocally characterized Palmer’s most recent foray into Australian politics during the current election cycle as nothing less than a threat to the country’s democratic process.

In a riposte that would likely garner scant attention had it originated from Donald Trump himself, Palmer took to Australia’s morning talk-show circuit the next day to blast Murdoch, referring to him as “this foreigner who tries to dictate what we do.” And then, as if to make sure that everyone was clear about the deliberately xenophobic nature of this remark, he took it an improbable step further by claiming that Murdoch divorced his wife after discovering that she was spying for the Chinese. The scenario reads like a strange photonegative of Trump’s dalliance with birther theology during last year’s presidential election.

Another incident from recent memory involves last year’s accusation that the well-known environmentalist organization Greenpeace was actually on the payroll of the Central Intelligence Agency. According to Palmer, who perhaps fittingly has made his fortune in part off of this most pollutant of energy sources, the most feared group of spooks in the world was keenly interested in destroying Australia’s coal-mining sector (Greenpeace called the accusation “ludicrous,” while the CIA for its part issued the standard denial).

But this synopsis of the unsavory actions of one man in the public eye becomes relatively insignificant when considering Palmer’s oft-vaunted business acumen. The story here stretches a little further back, to 2006, when he sold the mineral rights to a magnetite iron ore site to Hong Kong’s Citic Pacific Ltd. for $391 million and royalties.

Citic Pacific is actually the Hong Kong-based segment of China’s largest state-owned steel-centric investment vehicle. The prospective iron-ore mine, located in the country’s rugged northern Outback region, is called the Sino Iron Project. China is the world’s largest consumer of iron ore, and Sino Iron is its largest foreign magnetite iron-ore mining and production venture.

Iron-ore production has boomed in recent years, primarily as a response to astronomical Chinese economic growth that has lifted untold thousands out of poverty, and been a mainstay of the global economy since the turn of the millennium. The construction boom in the world’s most populous nation has vacuumed up large amounts of natural resources, particularly hard commodities such as copper and iron-ore, and has been one of the main reasons that the world’s biggest mining companies, such as Vale SA (VALE) , Rio Tinto (RIO) , and BHP Billiton (BHP) have recalibrated their production strategies to focus on these two metals in particular.

Thus, the 2006 deal between Citic Pacific and Palmer can be seen in the context of China’s desire to become more independent in terms of natural resources; currently, the country relies on the major miners for its commodities as those companies are on China for their revenues and profits. The only problem, however, is that the Sino Iron project has yet to produce one ounce, much less one ton, of magnetite iron ore.

Sino Iron, in actuality, has been an unmitigated disaster for the Chinese government in terms of its ostensible goals in entering the deal, as well as from the perspective of public relations. The project has been hampered by all manner of complications. Repair work for construction of the mine’s first two production lines should have been complete months ago, though it is now estimated that the necessary fixes will take at least another two years, at an estimated additional cost of some $1 billion.

But this extra billion brings the total spent on Sino Iron to some $8 billion. Unfortunately for the Chinese Government, it would be impossible, from the standpoint of public perception, to have abandoned the mine at any point after having shelled out $2.5 billion, so the project continues. Citic Pacific has at least taken the step of taking Palmer to court in Australia over the royalties agreement they signed with him.

The bad news doesn't end there for China however. After several years druring which the mining industry has directed its efforts towards the iron-ore rush, we are now in a situation where the metal is expected to hit record surplus by next year, which many banks, including Deutsche Bank (DB) and Goldman Sachs (GS) , have predicted will force prices lower for the foreseeable future. If an when Sino Iron does start producing metal, it is doubtful the project will ever really be able to pay for itself.

 

***correction: the original version of this article stated that Citic Pacific bought the mineral rights to Sino Iron for $2.5 billion. In fact, that figure was much lower, at $391 million. The article has been amended to reflect the correct figure***

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer


Liked What You Read? Join Equities.com as a contributor and get eyeballs on your content FOR FREE!

Results for vale
Nick
26 Apr 15 21:41:17
Tomorrow w/l: $AFMD $AGEN $CLF $VALE $UEC $AMCN
Anthony Milewski
26 Apr 15 21:27:39
RT @SeekingAlpha: How To Trade The Change In Narrative And Momentum For Iron Ore http://t.co/4nNaSxybgZ $BHP $RIO $UUP $VALE
Dominic Hawker
26 Apr 15 21:26:59
Vale extends gains amid new iron ore bull market http://t.co/y4RYrAPjfl $VALE, $BHP, $RIO, $CLF
Dr. Duru
26 Apr 15 21:26:52
My latest: How To Trade The Change In Narrative And Momentum For Iron Ore. http://t.co/4XNRby3LMG $RIO $BHP $VALE $UUP $USDX
Dr. Duru
26 Apr 15 21:24:57
Commented on: "How To Trade The Change In Narrative And Momentum For Iron Ore" http://t.co/CpvMNTxxMn $BHP $RIO $UUP $VALE
Justin Turner
26 Apr 15 21:17:41
@kroyrunner89 you going long on $VALE ??
Quantpost Basic Mats
26 Apr 15 21:15:48
$VALE News: "How To Trade The Change In Narrative And Momentum For Iron Ore $BHP …" http://t.co/1yXc9aQOrR Analyze: https://t.co/563Tba8Y1s
Seeking Alpha
26 Apr 15 21:15:47
How To Trade The Change In Narrative And Momentum For Iron Ore http://t.co/4nNaSxybgZ $BHP $RIO $UUP $VALE
Dan
26 Apr 15 20:32:01
RT @kroyrunner89: AMAZING weekend in Yellowstone! Back to reality tomorrow. Top watches 4/27/15: $MCP, $LOOK, $ENZN, $CALI, $VALE, $VLTC
will crowder
26 Apr 15 20:26:08
RT @kroyrunner89: AMAZING weekend in Yellowstone! Back to reality tomorrow. Top watches 4/27/15: $MCP, $LOOK, $ENZN, $CALI, $VALE, $VLTC
Kselfmade
26 Apr 15 20:22:07
RT @kasterbucket: @kroyrunner89 my top watches will be $PGI, $SLTD, $HOTR, $PBR, $AFMD, $VALE, $TRIL, $LPCN, $VLTC.
Profit.ly
26 Apr 15 20:20:26
RT @kroyrunner89: AMAZING weekend in Yellowstone! Back to reality tomorrow. Top watches 4/27/15: $MCP, $LOOK, $ENZN, $CALI, $VALE, $VLTC
Kselfmade
26 Apr 15 20:09:55
RT @kroyrunner89: AMAZING weekend in Yellowstone! Back to reality tomorrow. Top watches 4/27/15: $MCP, $LOOK, $ENZN, $CALI, $VALE, $VLTC
Chas Pinkard
26 Apr 15 20:07:19
@kroyrunner89 my top watches will be $PGI, $SLTD, $HOTR, $PBR, $AFMD, $VALE, $TRIL, $LPCN, $VLTC.
CEK CPA
26 Apr 15 20:00:47
@callorish @wandy922 ok. $VALE being an iron ore producer essentially a play on steel. Steel stocks have been very strong , so id rather
Mag Ni Fique
26 Apr 15 19:57:53
RT @kroyrunner89: AMAZING weekend in Yellowstone! Back to reality tomorrow. Top watches 4/27/15: $MCP, $LOOK, $ENZN, $CALI, $VALE, $VLTC
Alpha Maven
26 Apr 15 19:57:27
RT @kroyrunner89: AMAZING weekend in Yellowstone! Back to reality tomorrow. Top watches 4/27/15: $MCP, $LOOK, $ENZN, $CALI, $VALE, $VLTC
Ntrinzic
26 Apr 15 19:53:07
RT @kroyrunner89: AMAZING weekend in Yellowstone! Back to reality tomorrow. Top watches 4/27/15: $MCP, $LOOK, $ENZN, $CALI, $VALE, $VLTC
Alfian Rashid
26 Apr 15 19:28:29
RT @kroyrunner89: AMAZING weekend in Yellowstone! Back to reality tomorrow. Top watches 4/27/15: $MCP, $LOOK, $ENZN, $CALI, $VALE, $VLTC
Lee James
26 Apr 15 19:22:13
RT @kroyrunner89: AMAZING weekend in Yellowstone! Back to reality tomorrow. Top watches 4/27/15: $MCP, $LOOK, $ENZN, $CALI, $VALE, $VLTC
Tim Grittani
26 Apr 15 19:21:42
AMAZING weekend in Yellowstone! Back to reality tomorrow. Top watches 4/27/15: $MCP, $LOOK, $ENZN, $CALI, $VALE, $VLTC
Breaking News
26 Apr 15 19:07:02
$VALE $BHP $RIO $EWY $EWT: Can China's Easing Lift Its Neighbors?: http://t.co/c8NYFcFgY7
Shuli Ren
26 Apr 15 19:03:43
Can China’s Easing Lift Its Neighbors? http://t.co/yDKJdrDHP2 via @barronsonline $VALE $BHP $RIO $ASX #Korea #Taiwan #Australia
Stock Market Basics
26 Apr 15 18:40:17
RT @10Xtrading: Puts Hot as $VALE Gears up to Release Earnings this Week http://t.co/t8ZztKK43s
10X Trading
26 Apr 15 18:31:34
Puts Hot as $VALE Gears up to Release Earnings this Week http://t.co/t8ZztKK43s
Angel Dan
26 Apr 15 17:49:08
@ochsfamily I dont like $VALE, but will be in live with it when/if gets to 8.70ish 9.00 💚
Rodney
26 Apr 15 17:34:13
@DaChopa so you like $vale ?
Angel Dan
26 Apr 15 17:25:54
Few of many to watch for April 27 $FPP $IMH $RIGL $AFMD $VALE
Kym L
26 Apr 15 16:40:14
Earnings Thurs cont $MOS $MPC $NBIX $ODFL $PBI $PCRX $POT $PSX $RYL $SGEN $SPWR $STAY $SWKS $TASR $TEVA $ TSRO $TRUES $V $VA $VALE $WU $XOM
dailystockplays.com
26 Apr 15 15:11:51
Over Ichimoku http://t.co/fpKqBlTr6x $VALE/P $CAT $EPD $TSO $XLB $USG $MAS $HUN $XCO $OREX $LBTYK $LKQ $CBD $THRX $BRO $CUBE $MTCN $BUD
dailystockplays.com
26 Apr 15 15:04:08
CMF Improving http://t.co/B835QBnEQk $VALE $ITUB $BBD $ABBV $CVC $MXIM $AMX $MDLZ $TLM $SNDK $RAI $CIEN $EWH $MDRX $TV $TBI $MBT $FET
Nick
26 Apr 15 14:20:31
A few for tomorrow so far: $AFMD $AGEN $VALE
Nick
26 Apr 15 14:19:32
RT @Patel94Shyam: Watchlist for tomorrow and potential plays this week. http://t.co/0CzDeOQAfh $VALE, $AGEN, $SKX, $WUBA
TheYoungTrader
26 Apr 15 14:14:06
Watchlist for tomorrow and potential plays this week. http://t.co/0CzDeOQAfh $VALE, $AGEN, $SKX, $WUBA
Quasar
26 Apr 15 13:33:05
RT @OzarkTrades: 4/27 Watchlist $VLTC $AMCN $ADXS $VALE $NPD $MAT
Phil Goedeker
26 Apr 15 13:30:56
4/27 Watchlist $VLTC $AMCN $ADXS $VALE $NPD $MAT
Investors Hangout
26 Apr 15 11:30:21
$SCCO stock Financials Click Here: http://t.co/h9kEDqz2gM Also See: $VALE $FICO $GBSN $VALE #stockmarket #tradeideas ~
I Know First: Brasil
26 Apr 15 10:50:10
Previsão Algorítmica De Ações Agressivas: Ganho de até 71,12% em 30 dias http://t.co/8caeCZQWFI #ações #investimentos $VALE $ZNH
Investors Hangout
26 Apr 15 10:33:49
$DIA stock Chart Click Here: http://t.co/W5dglgiqur Also See: $ACWI $VALE $FSLR $KOP #stockmarket #tradeideas ~
Rosner Stocks
26 Apr 15 10:21:52
$YINN stock Stock Message Board Click Here: http://t.co/IkwtzYKK9O Also See: $IBM $VALE $EFA $TEVA #stockmarket #tradeideas ~
Rosner Stocks
26 Apr 15 09:34:51
$XLI stock Bid Size Click Here: http://t.co/PyQRiM62nk Also See: $UUP $AKAM $HZNP $VALE #stockmarket #tradeideas ~
Domani Capital
26 Apr 15 09:24:31
RT @MarketCurrents: Vale hires Barclays to assist with Queensland, Australia coalmine sales - The Australian http://t.co/5EUeRdtljc $VALE
chartguy89
26 Apr 15 09:06:47
VALE +11.24% Stock Charts $VALE Vale S.A. ADS (NYSE) Last Updated: 04/26/2015 11:06:47 VALE Stock Chart - 1 Mo http://t.co/OWOiFxwN32
Quantpost Basic Mats
26 Apr 15 09:03:32
$VALE News: "Vale hires Barclays to assist with Queensland, Australia coalmine…" http://t.co/f8QjGzkhUs Analyze: https://t.co/gecHiDQBAS
SA Breaking News
26 Apr 15 09:03:32
Vale hires Barclays to assist with Queensland, Australia coalmine sales - The Australian http://t.co/5EUeRdtljc $VALE
ProVesting
26 Apr 15 08:25:10
$GILD $VALE: Trending Tickers: Gilead Sciences Inc. (NASDAQ:GILD), Vale S.A. ...: http://t.co/MkVj0ls3Gb
Francisco de la Lama
26 Apr 15 07:59:59
RT @RaginCajun: Weekly Scorecard | Momentum Trading with RaginCajun http://t.co/VogLYm08kK $P $WB $YOKU $DANG $CLF $CX $VALE $MON $SID
Day-Trader.PL
26 Apr 15 07:01:54
Last week market movers: http://t.co/nF89DyPk4z $LOOK $VALE $CALI $UEC
Day-Trader.PL
26 Apr 15 07:01:33
Najmocniejsze spółki minionego tygodnia: http://t.co/QHA0qFrb1r $LOOK $VALE $CALI $UEC
Berliner
26 Apr 15 03:58:35
RT @yankeegank: Some ideas for next week stocks looking to make a move $VALE $ANY $WTW $OHRP $CBLI $NBS $TRGT
				
				
By  +Follow September 19, 2013 2:52AM
Share:

Comments

 

blog comments powered by Disqus

About us

Equities.com is the most advanced interactive online social ecosystem for the financial industry, serving as a resource center and next-generation communication platform that connects self-directed investors with public issuers, market experts, and professional service providers and vendors. Registered members can leverage our exclusive proprietary research tools such as the Small-Cap Stars, which outperformed 90% of all small-cap mutual funds, and robust do-it-yourself E.V.A. research reports. The Equities.com Issuer Dashboard is the ideal tool to communicate and manage investor awareness campaigns to the investment community, as well as to access valuable resources to help your company grow.

Market Data powered by QuoteMedia.
Copyright © QuoteMedia. Data delayed 15 minutes unless otherwise indicated. Terms of Use.