logo
Sign in or Register

Already a member?

Sign in

Or sign in with your account on:

Not a member yet?

Register
    

 


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 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
hernan manias
22 May 15 15:42:24
$VALE These Mining Giants Are Throwing in the Towel; Are Iron Ore Prices at an Inflection Point?: http://t.co/2USQfxvO9j vía @themotleyfool
Pardo Trader
22 May 15 15:00:08
Gráfico diário da #VALE5 $VALE http://t.co/GEyw4AWjBJ
dailystockplays.com
22 May 15 14:57:01
Elder Blue http://t.co/Max9weufrq $SPY $EEM $UWTI $EWJ $IWM $EFA $VALE/P $VIPS $AKS $CHK $TZA $XLU $GLW $JMEI $DNR $XLV $EBAY $SDS
dailystockplays.com
22 May 15 14:56:38
Enter Ichimoku http://t.co/QL4mfsy131 $UGAZ $ABEV $VALE $FOXA $CLF $MRO $OIBR $APC $WY $COP $CSIQ $TTWO $EGO $TWX $XHB $EWM $SPWR $GERN
Invest | Donate
22 May 15 14:10:38
@lookn4wins: AMBA Ambarella, Inc. Message Board Posts http://t.co/qqY4TW8Ky6 $AMBA $V $VALE $GIGA #AMBA #invest #stock
Stock Forums
22 May 15 14:01:07
BAC Bank Of America Corp. Change http://t.co/blEgaKy1kf $BAC $VALE $GOOGL $IYT #BAC #tradeideas #stock
lookn4wins
22 May 15 14:00:06
AMBA Ambarella, Inc. Message Board Posts http://t.co/I3m7S8LD67 $AMBA $V $VALE $GIGA #AMBA #invest #stock
SayNoToPlusnet
22 May 15 13:47:40
Hayul #Hayul IHPosts: VALE Vanguard European VIPERs Ex-Div Date Click Here -> http://t.co/VY0dMpIWRi Trending $VALE $SPLK $DIS $ERX #VAL…
clayton
22 May 15 13:47:33
VXF iPath S&P 500 VIX Short-Term Futures ETN Dividend Click Here -> http://t.co/e1aOwPA6zq Trending $VXF $DANG $VALE $WMIH #VXF #share…
Investors Hangout
22 May 15 13:47:03
VALE Vanguard European VIPERs Ex-Div Date Click Here -> http://t.co/WAoYwcHCpn Trending $VALE $SPLK $DIS $ERX #VALE #pennystocks #stock
IH NASDAQ OMX
22 May 15 13:38:36
IWM Real Estate iShares Yield Click Here -> http://t.co/NhU3BddyCl Trending $IWM $VALE $ITB $FFR #IWM #invest #nasdaq
Jake13
22 May 15 13:35:07
EA iShares MSCI Emerging Markets Tick Click Here -> http://t.co/tBH5rKxI7m Trending $EA $MU $VALE $UGAZ #EA #finance #invest
Investors Hangout
22 May 15 13:34:06
CTIX Chevron Corp. 52Wk High Click Here -> http://t.co/SJXqqTSFxz Trending $CTIX $LUV $BIDU $VALE #CTIX #stock #nasdaq
leahanne
22 May 15 13:32:17
ARIA ARIAD Pharmaceuticals, Inc. Bid Size Click Here -> http://t.co/bO25FTxXSB Trending $ARIA $YPF $PCLN $VALE #ARIA #tradeideas…
Market Realist
22 May 15 12:24:15
Iron Ore Market Sustains Another Blow on Chinese Data $BLT $VALE $CLF $XME http://t.co/WgyJbmVYVG
Ubirajara Ribeiro
22 May 15 12:06:28
$VALE - These Mining Giants Are Throwing in the Towel; Are Iron Ore Prices at an Inflection Point? http://t.co/DskY1S5TkC
Milonga
22 May 15 12:06:27
$VALE - These Mining Giants Are Throwing in the Towel; Are Iron Ore Prices at an Inflection Point? http://t.co/hQF3Za1XIn
Maggie Smith
22 May 15 12:06:05
$VALE - These Mining Giants Are Throwing in the Towel; Are Iron Ore Prices at an Inflection Point? http://t.co/QH7BhFCEo4
mojojojo
22 May 15 12:02:04
$INVN $FEYE $TWTR $PBR $VALE $BBRY really, just reading /trading the swings in the channels has been solid for me...#knowwhoyouare
BlockTradeAlert
22 May 15 11:52:02
BLOCK TRADE: $VALE 499,993 shares @ $6.58 [14:52:01]
Eduardo Vinante
22 May 15 11:35:43
Brazil stocks slide as Eletrobras cut to junk by ... $EBR $PBR $PBR.A $EBR.B $VALE $ELP $CIG $CPL $SBS $BSBR http://t.co/PsBgQBx7oL
James DiPlata
22 May 15 10:44:10
RT @danrocks4: XLF Technology Select Sector SPDR Bid Size Click Here -> http://t.co/DpItyXcIU3 Trending $XLF $MYEC $VALE $BABA #XLF #trade…
BNK Invest
22 May 15 10:42:14
Video: Friday's ETF with Unusual Volume: $CWI $ABEV $VALE $VRX.TO $SID #stocks http://t.co/bcA9HuN2QO
FinBUZZ Just-IN
22 May 15 10:23:07
These assets are seeing a jump in tweets $CROX $KNDI $IAG $LINE $VALE http://t.co/BJRyfXMJou
Invest | Donate
22 May 15 10:10:43
@IHPosts2: VALE Viggle Inc. Ex-Div Date Click Here -> http://t.co/G91Od8RXuW Trending $VALE $FXI $DGAZ $HYG #VALE #invest #pennystocks
Alpha Maven Alerts
22 May 15 10:00:37
$VALE active, relative volume: 13.32, 1H, 1:00 PM, #nyse
Invest | Donate
22 May 15 09:54:25
@IHNewsDesk: UNP United States Oil Fund, LP Short Sales Click Here -> http://t.co/uEdDXbnJHd Trending $UNP $VALE $SLV $RIG #UNP #invest #…
binaryoptionsocial
22 May 15 09:52:40
IHPosts: WERN WhiteWave Foods Co. Tick Click Here -> http://t.co/7y0ILFeS7t Trending $WERN $VALE $UVXY $UNG #WE… http://t.co/Csk7miIhta
PolgarStocks
22 May 15 09:52:36
YOKU ZIOPHARM Oncology, Inc. Financials Click Here -> http://t.co/scFDfkNvEN Trending $YOKU $VALE $FCX $BRK/B #YOKU #share #invest
binaryoptionsocial
22 May 15 09:52:35
IHNewsDesk: UNP United States Oil Fund, LP Short Sales Click Here -> http://t.co/RSrGq4hVnU Trending $UNP $VALE… http://t.co/Csk7miIhta
Stock Forums
22 May 15 09:52:15
ZIOP % Change Click Here -> http://t.co/CyW4L6GCIx Trending $ZIOP $FCX $AMPE $VALE #ZIOP #finance #stocks
danrocks
22 May 15 09:51:09
XLE Industrials Select Sector SPDR Ask Click Here -> http://t.co/xuG0bc2SpQ Trending $XLE $JMEI $IBB $VALE #XLE #finance #tradeideas
danrocks
22 May 15 09:51:09
XLF Technology Select Sector SPDR Bid Size Click Here -> http://t.co/DpItyXcIU3 Trending $XLF $MYEC $VALE $BABA #XLF #tradeideas…
Investors Hangout
22 May 15 09:51:08
XIV Energy Select Sector SPDR Financials Click Here -> http://t.co/5hZ9fN7iYl Trending $XIV $ARO $VALE $ISR #XIV #stockmarket…
Investors Hangout
22 May 15 09:50:39
WERN WhiteWave Foods Co. Tick Click Here -> http://t.co/Cabjn5VW9K Trending $WERN $VALE $UVXY $UNG #WERN #finance #nasdaq
Stock_Tracker
22 May 15 09:50:07
VALE Viggle Inc. Message Board Posts Click Here -> http://t.co/DqhpjhaQgI Trending $VALE $DWTI $XLK $EWG #VALE #pennystocks #invest
Rosner Stocks
22 May 15 09:50:06
VALE Viggle Inc. Bid Click Here -> http://t.co/6e72Y0gZm4 Trending $VALE $NAT $BAA $LUV #VALE #stockmarket #stock
Investors Hangout
22 May 15 09:50:06
VALE Viggle Inc. Yield Click Here -> http://t.co/jpsqkScadX Trending $VALE $DUST $TCK/B.TO $IWM #VALE #invest #share
Rosner Stocks
22 May 15 09:49:39
VALE VOIS, Inc. Yield Click Here -> http://t.co/F61M423Mvc Trending $VALE $EUO $UVXY $SDRL #VALE #invest #stocks
Stock Forums
22 May 15 09:49:38
VALE Viggle Inc. Chart Click Here -> http://t.co/i4UBbTWv3o Trending $VALE $IVAC $EFA $RSX #VALE #stockmarket #stock
Stock_Tracker
22 May 15 09:49:37
VALE VOIS, Inc. Ideas Click Here -> http://t.co/rMpXDJwByL Trending $VALE $PG $DIA $EFA #VALE #tradeideas #investing
IH NASDAQ OMX
22 May 15 09:49:36
VALE Viggle Inc. EOD Data Click Here -> http://t.co/3p2qCBu3RW Trending $VALE $NFLX $VGGL $AKRX #VALE #investing #stockmarket
Stock_Tracker
22 May 15 09:49:36
VALE Viggle Inc. Stock Message Board Click Here -> http://t.co/3YKL4DEI3q Trending $VALE $AAL $NI $TLT #VALE #finance #stocks
nasdaqfan
22 May 15 09:49:35
VALE VOIS, Inc. Last Price Click Here -> http://t.co/djHNqLFkHQ Trending $VALE $CVX $RSX $GLD #VALE #tradeideas #stocks
danrocks
22 May 15 09:49:22
VALE VOIS, Inc. Ask Size Click Here -> http://t.co/UYdS4qYKwV Trending $VALE $ZIOP $AMBA $GRUB #VALE #investing #share
Investors Hangout
22 May 15 09:49:20
VALE Viggle Inc. Ex-Div Date Click Here -> http://t.co/oJ6Qjgx5Je Trending $VALE $FXI $DGAZ $HYG #VALE #invest #pennystocks
Stock Forums
22 May 15 09:49:19
VALE VOIS, Inc. EOD Data Click Here -> http://t.co/il2g3LUdTc Trending $VALE $SH $DGAZ $VOIS #VALE #tradeideas #finance
IH News Desk
22 May 15 09:49:15
UNP United States Oil Fund, LP Short Sales Click Here -> http://t.co/wXtZRsMIUw Trending $UNP $VALE $SLV $RIG #UNP #invest #nasdaq
PolgarStocks
22 May 15 09:47:34
TNA Trina Solar Ltd. News Click Here -> http://t.co/tPUROKcVY1 Trending $TNA $VALE $DE $XLY #TNA #stocks #investing
leahanne
22 May 15 09:47:04
TEVA iShares Barclays 20+ Year Treasury Bond Fund Exchange Click Here -> http://t.co/uLmogQu9KI Trending $TEVA $GPRO $VALE $IBM #TEVA…
				
				
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.

Login or Register

LOG IN