Archive for February, 2012


Wednesday, February 22nd, 2012

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Mining giant Rio Tinto sources said that Rio has unearthed a “remarkable” 12.76 carat pink diamond in Australia, the largest of the rare and most precious stones ever found in the resources-rich nation.

Named the Argyle Pink Jubilee, the huge rough stone was found at Rio’s pink diamond holdings in the Kimberley region of western Australia and would take almost 2 weeks to cut and polish, it was said.

“This rare diamond find is generating incredible excitement. A diamond of this calibre is unprecedented — it has taken 26 years of Argyle production to unearth this precious gem and we may never see one like this again,” said Josephine Johnson from Rio’s Argyle Pink Diamonds division.

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“The individual who gets to wear this remarkable pink diamond will be an  incredibly lucky person.”

The light pink Argyle Jubilee has similar colour tones to the 24-carat Williamson Pink given to Britain’s Queen Elizabeth II as a wedding gift which was later re-set into a Cartier brooch for her coronation.

The Williamson was discovered in Tanzania in 1947 and  ranks among the finest pink diamonds in existence.

Rio produces more than 90 percent of the world’s pink diamonds from the Argyle mine, and said, typically large stones like the Jubilee typically went to museums, were gifted to royalty or end up at prestigious auction houses like Christie’s for sale to the highest bidder.

Christie’s had only auctioned 18 polished pink diamonds larger than 10 carats in its 244-year history, Rio said.

When the Jubilee pink diamond has been cut and polished it will be graded by international experts and showcased globally before being sold by invitation-only tender later this year.

This 12.76 carat sparkling gem which was discovered at the Rio Tinto Argyle mine is among the largest and most valuable pink diamonds in the world.

The rarest of diamonds, pink diamonds have been  known to fetch about $1 million a carat on the market.

Sourced & published by Henry Sapiecha



Monday, February 20th, 2012

Iran struggles to find new oil customers

ByJavier Blas in Vancouver and Najmeh Bozorgmehr in Tehran

An Iranian technician works at the Balal offshore oil platform in the Gulf waters.

Iran is struggling to find a buyer for nearly a quarter of its annual oil exports as looming western sanctions targeting the country’s nuclear programme start to bite the world’s third-biggest crude exporter.

Tehran is trying to sell an extra 500,000 barrels a day of oil, or nearly 23 per cent of what it exported last year, to Chinese and Indian refiners, according to two industry executives familiar with the talks.\

“Iran is facing severe problems finding a new buyer,” one of the executives said, explaining that Tehran was not offering discounts for the oil, which is for delivery from the start of April.

If it cannot find customers by mid-March for the oil, which is equal to the amount European refiners bought last year, Iran would be forced to put unsold barrels into floating storage in supertankers, or reduce output. Either measure could push oil prices higher.

Brent crude hit an eight-month high of $120.70 a barrel on Friday, amid worries about Iranian supplies and production disruptions in South Sudan and Yemen. On Monday it rose again, to $121.01 a barrel.

The European Union approved a ban on oil imports from Iran last month but delayed full implementation until July 1 so that Greece, Spain and Italy had enough time to find alternative supplies.

In what appeared to be an effort to pre-empt the embargo, Tehran announced at the weekend it was cutting crude sales to French and British companies.

Alireza Nikzad, a spokesman for Iran’s oil ministry, announced on Sunday that Tehran had replaced the companies from the two countries with “new customers”. He gave no further details.

Both France and Britain have already all but stopped buying Iranian crude, suggesting the move may turn out to be largely symbolic.

Even so, this is the first real action by Tehran after weeks of threats and could still have a psychological impact that may push up oil prices as the market worries that Iran could halt exports to other nations.

The Iran crisis is set to dominate International Petroleum Week, the annual gathering of the oil industry that starts on Monday in London.

The International Energy Agency, the western countries’ oil watchdog, said earlier this month that European refiners “have already curtailed imports of Iranian crude”, and added that some Asian buyers would follow. China, the single-largest buyer of Iranian crude with imports of about 550,000 b/d last year, is now buying half that volume, according to the IEA.

European oil companies including Total of France, Royal Dutch Shell, Repsol YPF of Spain and Eni of Italy have either stopped buying Iranian oil or have halted spot purchases, industry executives said.

Iranian lawmakers have called for an immediate halt in the country’s exports of oil to all EU states to hurt the region’s economy and demonstrate the country’s determination to go ahead with its nuclear ambitions.

Sourced & published by Henry Sapiecha


Monday, February 20th, 2012

This week will get off to a slower start, with the US market being closed for Presidents’ Day on Monday. However, the FX markets are open, and with the next repayment deadline for Greece looming on the horizon, there is plenty of room for movement.

As traders, this has been on the horizon for a while, and as such, we feel the market is a little headline “punch drunk” but any material deterioration in the Greek situation may prompt a sharp reaction.

As a result, we continue to hold our Euro/Swiss position, which remains in good profit. In terms of other positions, our holdings in the US oil fund ETF are performing well and we will be looking to adjust the risk management on this trade. Additionally, we have entered into a seasonal position on Soy Bean oil too. Our sugar trade resulted was stopped out for a small loss.

Tonight I will be hosting a free trading webinar showing you markets you may not have considered that you could be trading in a matter or weeks…

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Andrew Baxter

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Thursday, February 9th, 2012



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Saturday, February 4th, 2012

The Rinehart story in pics

FOR iron ore billionaire Andrew Forrest, Gina Rinehart’s move this week to become Fairfax’s largest shareholder is nothing if not serendipitous. For the mega-wealthy, control of Australia’s most influential newspaper group, Fairfax, is like an insurance policy against political decisions that run against their commercial interests.

Rinehart has paid less than $200 million for this insurance and while she probably will have to pay more, the investment could yield a hefty return.

According to well-placed sources Rinehart was not the only candidate running the ruler over Fairfax – Forrest and his mate Kerry Stokes were sniffing around as well.

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Gina Rinehart

Over on the east coast of Australia another astute investor, Peter Hall from Hunter Hall, was also taking a very keen interest in Fairfax.

His fund was not looking for a big stake but he was prepared to take a $10 million punt that either Rinehart or Forrest would.

He thought Fairfax stock was undervalued late last year but figured he had an insurance policy if Fairfax’s prospects went pear-shaped. Hall’s own insurance policy – the emergence of a billionaire seeking influence – paid off.

Just in time, too. Hall was getting more concerned about the media group’s advertising and readership numbers in December and January. Hall sold his shares in Fairfax to Rinehart this week.

Kerry Stokes may have also had an agenda. Sure, influence would have played a significant part in the appeal of Fairfax and he is a big holder of iron ore assets. But he has also made plenty of money out of media over the past 30 years and has other properties – such as the Seven television network and West Australian Newspapers (WAN) – which could have dovetailed nicely with the country’s largest independent news publisher.

For Rinehart and for Forrest the rationale is simple. Invest several hundred million to gain control of Fairfax, and wrest the political agenda from the government.

In Rinehart’s case this would involve using the editorial influence of Fairfax to get rid of Labor and its expensive (to her) taxes – the minerals resource rent tax and the carbon tax – an outcome that could ultimately save billions.

The more politically agnostic Forrest might have been happy to leave the regime but lose its troublesome policies.

The roughly $200 million spent on Fairfax shares could be a downpayment on saving Rinehart and the other resource barons a multiple of this figure in future tax.

Remember, in the hard world of finance, a $100 million annual saving in tax is the same as adding $1 billion to the value of your business. The splendid kicker for Forrest is that he gets all the benefits of Rinehart’s insurance cover without having to pay for the premium or the excess.

But this may not be a fool-proof plan because taking control of the editorial agenda is not necessarily that easy. Rinehart will first have to acquire enough shares to control the board. The 12.6 per cent she has now probably won’t do.

The investment banking strategy experts contend Rinehart will now need to increase her interests to a whisker under 20 per cent – the threshold set by the corporations law, beyond which a full takeover bid for all shares must be made.

From this point, Rinehart would probably still fall short of the necessary shareholding needed to take control of the board and the company. Once the 20 per cent is reached she will be able to use the corporations law to creep upwards at the rate of 3 per cent every six months.

Within a year she will be able to reach a shareholding of almost 26 per cent without the need to make a takeover – the dynamics of power on the Fairfax board would have her in a strong position of influence.

Ironically the template for this corporate manoeuvre was used by Stokes to get his tentacles around West Australian Newspapers.

Back in 2008, Stokes took control of WAN from the humble shareholding of 22.3 per cent, having crept up the register from just over 19 per cent. It’s slower than a takeover – you can only buy 3 per cent every six months – but cheaper.

It is a matter of law that control is deemed to have passed once a shareholder gets 30 per cent (in the absence of another, larger shareholder.)

Thus, for Rinehart, waiting just one year from now would see her take effective control of Fairfax and the highly regarded editorial integrity of trust, built up over 150 years, could be sacrificed for a few hundred million pieces of gold.

To do this, she would need to inject a few user-friendly editors into the Fairfax newspapers including, The Sydney Morning Herald, The Age and The Australian Financial Review, but this could all be done well in time to influence the course of the next election.

Rinehart has already had some success in achieving influence through the acquisition of 10 per cent of Ten Network last year.

Not only was she readily granted a board seat but the politically like-minded News Corp journalist, Andrew Bolt, was given his own program, some say through Rinehart’s influence.

Bolt’s career ascension also has been helped by Rinehart’s long-time friend and media player and advertising tsar, John Singleton.

Bolt’s voice is also heard on 2GB, the Sydney radio station that is majority-owned by Singleton and home to two of the country’s most strident talk-back hosts, Alan Jones and Ray Hadley.

Singleton, who shares Rinehart’s views on mining and taxes, recently told Fairfax’s Good Weekend magazine: ”We (Singleton and Rinehart) have been able to overtly and covertly attack governments … Because we have people employed by us like Andrew Bolt and Alan Jones and Ray Hadley, who agree with her thinking about the development of our resources, we act in concert in that way.”

Singleton told Weekend Business yesterday Rinehart would be a great addition to the Fairfax board.

”She is a lot smarter than people like (former chief executive) Fred Hilmer and crooks like (former major shareholder) Conrad Black.” Singleton, who is also a former Fairfax director, claims another, Sir Zelman Cowen, didn’t know what EBIT (earnings before interest and tax) stood for.

Singleton says Rinehart doesn’t need the money or the influence but in his opinion she will be active in having her say at board level about the appointment of editors.

”She is frustrated at the negative way Australia is portrayed (by the media) and the fact that mining is portrayed as the big bad wolf and not the saviour … I reckon she wants to have a say but doesn’t make comments in the media because she is not extroverted … it’s not her style.

”I will say to her when I see her, ‘Good on you kid, your father would be proud of you’.”

But he agrees that a full takeover is not on the cards.

To acquire more than the amount necessary for control would be profligate.

Rinehart needs to play the Goldilocks card – not too much and not too little, but just right.

Analysts agree that suggestions Rinehart will make a full takeover bid for Fairfax are strategically wide of the mark.

Taking into account the cost of mounting a full takeover offer and the cost of the debt inside the company the price tag would be near $3.8 billion. That is a hefty price for insurance – the equivalent of paying the premium for a teenager to drive a Rolls-Royce.

It also assumes that Rinehart’s pockets are bottomless.

She has now taken the mantle of Australia’s richest person and there are suggestions that her worth could be great as $20 billion.

But the value of her assets is entirely different to her access to cash flow and the former must be considered a guesstimate. Suggestions that her fortune could be on track to $100 billion appear to have been plucked out of the ether.

Such talk about her personal life and wealth is an anathema to Rinehart. She is intensely private and opens the corporate veil to no one. One example is her involvement in a desperate legal struggle to suppress the details of the acrimonious court battle she is engaged in with her children.

(Interestingly, she is also engaged in a legal battle with Fairfax and other media organisations on suppression of the court case.)

It is only via the relationship she has with her listed partner, Rio Tinto, that the outside world gets a sneak look at aspects of her financial spreadsheet.

At its most general we understand that her half of the yearly revenue from iron ore project Hope Downs produces royalties of about $2 billion a year, which should expand to an additional $600 million to $700 million, based on today’s price of iron ore.

On top of this the primary operating company earns about $100 million a year from her half share in the Hancock and Wright partnership – a legacy from her father’s 1960s foray into the iron-ore-rich Pilbara region of Western Australia.

The estimate of Rinehart’s wealth has been revised over the past couple of weeks on the back of a 15 per cent investment in the Roy Hill development – giving it a value on paper of $10 billion.

But this project is still in its early stages and will need plenty of capital expenditure in both railway and port facilities.

There are two schools of thought on whether she will seek to use her capital to develop this new iron ore prospect or whether she will scope out a buyer.

If Rinehart wants to develop this and ”live the dream” of Lang Hancock, then there would be less room for capital to be sidelined for the likes of a full takeover of Fairfax.

As immense as her current loyalty payments are they are also subject to variations based on the price of iron ore, which is at present at near-historical highs.

Fairfax shares have now fallen back below Rinehart’s recent 81¢ buying spree price, which is a clear suggestion the market is not expecting a full takeover.

The additional wrinkle in the Rinehart financing story is in the battle being waged over control of a large chunk of the family’s fortune.

Rinehart’s three oldest children, John Langley Hancock, Bianca Hope Rinehart and Hope Rinehart Welker, are trying to remove her as the trustee of the Hope Margaret Hancock trust, set up by their late grandfather Lang Hancock. They are alleging ”serious misconduct”.

Regardless of the outcome Rinehart will remain an extremely wealthy woman – one who Singleton contends can always get an audience with any politician. But then so can Andrew Forrest and Clive Palmer.

But the introduction of the mineral resource rent tax is clear evidence that the rich can get the ear of Canberra but not necessarily change policy, as Forrest himself discovered.

The ability to influence a large media organisation is a far better political attention grabber.

If Rinehart increases her investment in Fairfax sufficiently to take control of the board, the potential returns for her interests in mining could be monumental.

It’s certainly a better bet than standing on the tray of a flat-bed ute holding a loudspeaker.

Sourced & published by Henry Sapiecha


Saturday, February 4th, 2012

Cast in iron: Yes- the millions turned to billions

Leonie Lamont February 4, 2012

It was 20 years ago that the mining magnate Lang Hancock’s widow, Rose, summoned journalists to the gate of her flamboyant mansion, and dispensed copies of her recently departed husband’s will.

It was 1992, the year both Hancock’s daughter, Gina Rinehart, and Rose first appeared on the BRW Rich List. Lang Hancock’s $150 million fortune had been divied up, each woman listed with a fortune of $75 million, in recognition of the will’s 50:50 split.

There were decade-long legal battles, the bankrupting of the estate and paying down debts for business follies. But importantly the iron ore royalty ”rivers of gold” paid by Hamersley Iron (now Rio Tinto) to Hancock Prospecting were preserved in corporate structures for Mrs Rinehart and her children. The deal struck in 1962 involves a continuing royalty valued at 2.5 per cent of ore mined from many of Rio’s West Australian mines.

Given today’s iron ore price, that royalty stream now accounts for about $100 million a year.

In 20 years, Mrs Rinehart has taken her $75 million inheritance to her fortune as Australia’s richest citizen. The Forbes Asia rich list named her this week as the wealthiest woman in Asia, worth $16.88 billion. Other calculations, based on iron ore prices of US$140 a tonne last week, value her at $20 billion.

She first cracked BRW magazine’s billionaires list in 2006, when her fortune sprang from $900 million to $1.8 billion. The upward trajectory was evident in 2005 when two wealth generating forces took off.

Iron ore prices jumped by 70 per cent, and her royalties rose accordingly. But the greatest source of her wealth lay in the Pilbara mining project Hope Downs, named after her mother, Hope.

After her South African partner Kumba Resources was taken over, she bought out its 49 per cent stake in what was one of WA’s biggest and richest iron ore deposits. At the time, Hope Downs accounted for half her wealth, being valued at $472 million.

Hope Downs propelled her into the billionaire ranks, and after taking Rio Tinto on board as joint partner, by 2007 Hope Downs was exporting ore. It has been estimated that when Hope Downs reaches full production of 45 million tonnes annually, Mrs Rinehart will receive an income stream of $40 million … a week.

By 2014, her second iron ore mine, Roy Hill, is due to start exporting. Even bigger than Hope Downs, the $7 billion mine is being developed with the Korean steel maker Posco, and it was the sale of a stake to Posco that helped double Mrs Rinehart’s fortune this year.

The doubling is a pattern. Last year, BRW shows her wealth also more than doubled, from $4.75 billion to $10.31 billion.

Going back 40 years, one can find the seeds to another source of this wealth – Hancock’s close friendship with the long-time Nationals premier of Queensland Sir Joh Bjelke-Petersen. The Hancock empire took early stakes in Queensland coal leases, with grand plans for rail lines laden with coal trains spanning the north.

Last year, Mrs Rinehart parlayed some of those assets, in Queensland’s land-locked Galilee Basin, into a $1.3 billion sale to GVK, the privately owned conglomerate of the Indian billionaire G.V. Krishna Reddy. Mrs Rinehart retains a minority share in that deal, and GVK has planned for a $10 billion outlay on the first phase, which includes a 500-kilometre rail as well as new port facilities in which Hancock interests will have a serious stake.

To date, her Midas touch with mining has not been translated into profits in her forays into Australian media assets – Ten Network Holdings and Fairfax Media, which publishes the Herald.

Received & published by Henry Sapiecha