Sign in or Register

Already a member?

Sign in

Or sign in with your account on:

Not a member yet?



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

By  +Follow September 19, 2013 2:52AM
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 and Connect With Your Favorite Financial Experts FOR FREE! Members of Equities.com gain access to our leading financial news and content, active social investment community, proprietary research tools including the 2014 Small-Cap Stars, E.V.A. reports and more.

Results for vale
7 Oct 15 09:17:13
RT @OliverGross_JRB: Morgan Stanley, #mining stocks: "Emerging #markets, #miners a screaming buy" $bhp $rio $vale $fcx $glen.l $fm.t http:/…
7 Oct 15 09:17:13
RT @OliverGross_JRB: Morgan Stanley, #mining stocks: "Emerging #markets, #miners a screaming buy" $bhp $rio $vale $fcx $glen.l $fm.t https:…
7 Oct 15 09:12:02
$VALE: Vale Stock Advancing As Brazil’s Real Extends Winning Streak: http://t.co/A1qYz0gHpU
Oliver Gross
7 Oct 15 08:58:49
Morgan Stanley, #mining stocks: "Emerging #markets, #miners a screaming buy" $bhp $rio $vale $fcx $glen.l $fm.t http://t.co/sFd1Ir2rIE
Oliver Gross
7 Oct 15 08:58:35
Morgan Stanley, #mining stocks: "Emerging #markets, #miners a screaming buy" $bhp $rio $vale $fcx $glen.l $fm.t https://t.co/dt6fp7PGVY
Sleek Money
7 Oct 15 08:41:36
Vale SA’s Buy Rating Reaffirmed at Deutsche Bank $VALE http://t.co/KA3K3Abxw6
Enrico Vincenzo
7 Oct 15 08:30:26
RT @TweetsMillenia: $BRZU to spike higher on $PBR +12% and $VALE +11%. Moody's confirmed Brazil ratings, Real appreciating, Fed easy + comm…
7 Oct 15 08:23:36
RT @paynej247: Quick Scan... $PPCH $WG $MEET $ALU $EXXI $VG $REN $CANF $INTC $CAR $RIG $EOX $FCX $VALE $PBR $TCK $RIO $NY…
Bruno Blanco
7 Oct 15 08:23:19
RT @tritangotraders: $PBR AND $VALE 9 arriba , samba carioca
7 Oct 15 08:23:13
RT @paynej247: Quick Scan... $PPCH $WG $MEET $ALU $EXXI $VG $REN $CANF $INTC $CAR $RIG $EOX $FCX $VALE $PBR $TCK $RIO $NY…
Warren of Wall St
7 Oct 15 08:22:54
Our DCF shows Vale S.A is available at a 36.0% discount $VALE: https://t.co/axWKOsysCA http://t.co/iMEKMkuLyd
Time=Best Stock
7 Oct 15 08:21:53
Trade Beast
7 Oct 15 08:10:22
Bought 2,000 shares of $VALE at 4.60 then 1900 at 4.16 currently at 5.17 should continue to climb even after the ex-dividend date as well.
7 Oct 15 07:48:36
Volume Alert - VALE 5.30 Vale S.A. $VALE Hit a high today of 5.35 Closing the day 10:30 at 5.30 +0.51 +10.65% http://t.co/HwKEh9UCkc
7 Oct 15 07:34:34
Big Gainer Alert: Trading today’s 8.9% move in VALE $VALE http://t.co/EVk28UeXwJ
Millenia Panama
7 Oct 15 07:34:11
$BRZU to spike higher on $PBR +12% and $VALE +11%. Moody's confirmed Brazil ratings, Real appreciating, Fed easy + commodities going higher
Marcus Magarian
7 Oct 15 07:14:00
Commodity bounce boosts Brazil $PBR $VALE http://t.co/UaeUW3hafE
Seeking Alpha
7 Oct 15 07:11:42
Commodity bounce boosts Brazil http://t.co/zewqV2C4vI $PBR $VALE $BSBR $BBD
Financial Stocks
7 Oct 15 07:11:42
Commodity bounce boosts Brazil http://t.co/3kjnunrCrR $PBR $VALE $BSBR $BBD
Quantpost Basic Mats
7 Oct 15 07:11:41
$VALE News: "Commodity bounce boosts Brazil $PBR $VALE $BSBR $BBD" http://t.co/wF0FVoL9ok Analyze: https://t.co/VaqWPpQuQs
Stocks On The Move
7 Oct 15 07:11:41
Commodity bounce boosts Brazil http://t.co/FChzJq5218 $PBR $VALE $BSBR $BBD
Forex and Currencies
7 Oct 15 07:11:41
Commodity bounce boosts Brazil http://t.co/GfV6MPY4ox $PBR $VALE $BSBR $BBD
Quantpost $PBR
7 Oct 15 07:11:41
$PBR News: "Commodity bounce boosts Brazil $PBR $VALE $BSBR $BBD" http://t.co/Va5BW6kH2w Analyze: https://t.co/npfksbJTMk
Breaking News
7 Oct 15 07:11:40
Commodity bounce boosts Brazil http://t.co/SPPeSriSY9 $PBR $VALE $BSBR $BBD
7 Oct 15 07:04:27
$HREEF $HRE.V 1000%+ upside from arbitration award $MSFT $WAG $LVS $EXC $VALE $XLNX investors read http://t.co/IPTSQ0cRfQ
Jennifer smith
7 Oct 15 06:55:38
Good to see $vale join the party up 8%
Investors Hangout
7 Oct 15 06:50:28
XLK Technology Select Sector SPDR Volume http://t.co/BhUYmd1SgO $XLK $XLF $VALE $XLI #XLK #pennystocks #stockmarket
7 Oct 15 06:48:35
VALE Companhia Vale do Rio Doce SA Day Low http://t.co/N39FzSxtQH $VALE $SLV $GILD $OIL #VALE #tradeideas #investing
Rosner Stocks
7 Oct 15 06:48:13
VALE Companhia Vale do Rio Doce SA Quotes http://t.co/S8wY0K1lXh $VALE $YUM $DUST $NKE #VALE #tradeideas #stocks
7 Oct 15 06:48:08
VALE Companhia Vale do Rio Doce SA Ask http://t.co/L3iT2LQXt9 $VALE $C $GDX $XOP #VALE #stock #share
IH News Desk
7 Oct 15 06:48:08
USO United States Oil Fund, LP P/E Ratio http://t.co/VIL15U1vhw $USO $VALE $BIB $EUM #USO #share #tradeideas
7 Oct 15 06:45:34
SQQQ ProShares UltraPro Short QQQ Quotes http://t.co/538mcAACcZ $SQQQ $GLD $VALE $SBLK #SQQQ #stocks #invest
7 Oct 15 06:43:48
RT @DeFotis: Why Glencore Won’t Fold #EmergingMarket #commodities #trading http://t.co/fMNYuhAwyA $GLNCY $RIO $VALE $BHP @barronsonline #de…
7 Oct 15 06:41:33
NUGT Direxion Daily Gold Miners Bull 3x Shares Market Cap http://t.co/AUUTyhcZ9k $NUGT $VALE $AEM $A #NUGT #tradeideas #stocks
7 Oct 15 06:40:04
ITB iShares Dow Jones U.S. Home Construction Financials http://t.co/7sfC1gsbWu $ITB $EWZ $VALE $XLU #ITB #investing #stocks
7 Oct 15 06:38:44
FNMA Federal National Mortgage Volume http://t.co/iRhEZlH5rw $FNMA $VALE $RWM $UGAZ #FNMA #investing #stockmarket
7 Oct 15 06:38:23
GBSN Great Basin Scientific, Inc. Day Low http://t.co/G2A9UCRBpk $GBSN $CVT $KEG $VALE #GBSN #nasdaq #investing
7 Oct 15 06:38:22
FXE Currency Shares Euro Trust Filings http://t.co/Mfy9203Lmi $FXE $VALE $HYG $NEM #FXE #stock #finance
Clark Joseph Kent
7 Oct 15 06:37:34
Pre-Market Gainers: $GNCA +21% $MEET +16% $MT +11% $RIO +9% $ORIG +9% $SUNE +9% $EXXI +8% $LNCO +7% $BBL +6% $SDRL +6% $VALE +6% $CANF +6%
7 Oct 15 06:37:03
$VALE sube 10% locura en las redes sociales de América Latina y el Caribe.
Jose Prats 3T
7 Oct 15 06:36:20
$PBR AND $VALE 9 arriba , samba carioca
7 Oct 15 06:36:09
CPG.TO Crescent Point Energy Corp. Market Cap http://t.co/KtHqzIkPPa $CPG.TO $ORIG $AEM $VALE #CPG.TO #pennystocks #tradeideas
IH News Desk
7 Oct 15 06:35:48
CLF Cliffs Natural Resources Inc. Investor Opinions http://t.co/1qIophy6FJ $CLF $UVXY $VALE $XLI #CLF #pennystocks #stocks
7 Oct 15 06:34:18
RT @ProfitTradeRoom: Premarket $GNCA +21% $MEET +16% $MT +11% $RIO +9% $ORIG +9% $SUNE +9% $EXXI +8% $LNCO +7% $BBL +6% $SDRL +6% $VALE +6%…
IH News Desk
7 Oct 15 06:33:39
BTE.TO Baytex Energy Corp. Investor Opinions http://t.co/9wGBHBBeRY $BTE.TO $MDR $VXX $VALE #BTE.TO #stock #tradeideas
7 Oct 15 06:33:35
"@Tatoduk: Pre-Market Gainers $GNCA 19%, $MEET 17%, $PVA 12%, $MT 12%, $RIO 9%, $SUNE 9%, $EXXI 7%, $NBG 7%, $LNCO 7%, $BBL 6%, $VALE 6%"
7 Oct 15 06:33:33
$PBR 8,14% $VALE 7,93%
Robert Lesnicki
7 Oct 15 06:33:18
$VALE Back above 5 on the open +8.3% on the session. The oversold bounce continues in materials...
7 Oct 15 06:25:03
$VALE: Brazil-based Stocks To Watch For: Petroleo Brasileiro Petrobras SA …: http://t.co/sCgFJYGrwJ
Large Void Bot
7 Oct 15 06:24:04
In Play: $SUNE, $CTRV, $CANF, $RIO, $SDRL, $VALE, $UGAZ, $RIG High Uncertainty: $MON, $BABA, $ADXS
By  +Follow September 19, 2013 2:52AM



blog comments powered by Disqus

 Today's Must Reads

Market Got You Down?: Here Are Six Hot Stocks

Global Winners and Losers in the Oil Shakeout

This Bull Market is No Stranger to Big Fourth-Quarter Comebacks

When to Sell and When to Rent an Investment Property

Saving the Small-Cap Market


Small-cap stocks offer investors many benefits, ranging from higher growth potential to overlooked value opportuni... in Equities.com's Hangs on LockerDome

About us

Equities.com is an advanced financial data portal and social network designed to connect self-directed investors with the world’s most innovative startup and small cap companies. Through our in-depth coverage of small cap markets, comprehensive research and stock valuation reports, state of the art issuer products, and world class events, Equities.com provides the social tools and insight that drive tomorrow’s investment relationships and opportunities.

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

Login or Register