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.

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.

Received & published by Henry Sapiecha

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Integra Mining (ASX: IGR) achieved a gold production milestone of 100,000 ounces in early January at its Randalls Gold Project located 60-130 kilometres east of Kalgoorlie in Australia’s most prolific goldfield.

First gold was poured from the project in September 2010 and Integra ramped up to first commercial production in March 2011.

Managing director Chris Cairns said another significant milestone has been achieved by Integra’s operations people.

“This follows on from having been voted the Gold Mining Journal’s ‘Gold Miner of the Year’ for 2011. It is great to see the site based personnel receiving the well-deserved recognition of their industry peers,” he said.

Integra continues to unleash the potential of the Randalls project with assays last week from follow up diamond drilling at the Imperial prospect returning high grade gold-copper intersections including 6.2 metres at 13.43 grams per tonne (g/t) gold and 1.5% copper.

Highlights also included an interval of 2 metres at 31.1g/t gold and 1.3% copper.

Mineralisation at the prospect is open along strike to the north where shallow WMC-era reverse circulation drilling intercepted 2 metres at 1.8g/t from 52 metres, and to the south where there is no reverse circulation drilling for some 200 metres.

Randalls has a JORC Resource of 30 million tonnes at 2.6g/t for 2.5 million ounces of contained gold.

Sourced & published by Henry Sapiecha

CONGA GOLD PROJECT IN PERU IN STALL MODE BUT HOPEFUL TO PROCEED

The Wall Street Journal reports Peru on Friday announced a programme of social and infrastructure investments in its poor Cajamarca region aimed at winning over local protesters who have brought to halt Newmont Mining’s $4.8 billion Conga project over environmental concerns.

Protestors, led by Cajamarca’s Maoist governor Gregorio Santos, say Conga will destroy the environment by transforming four high Andean lakes into reservoirs for mining operations.

In December the government was forced to declare a state of emergency after boulders were used to block exits from the regional capital of more than 200,000 inhabitants, schools, hospitals and business were closed and dozens injured in clashes with police.

The Wall Street Journal reports Peru’s new Prime Minister, Oscar Valdés, who was elevated to the position after a cabinet shake-up prompted by the Conga crisis said late Thursday that he thought work on the project which was stopped in November could restart by March:

On Friday, René Cornejo Diaz, the housing minister, was sent to Cajamarca to tout the federal government’s program to invest 4.3 billion soles, about $1.6 billion, in infrastructure and expanded antipoverty programs in Cajamarca.

But Cajamarca leaders, including the governor, Gregorio Santos, didn’t seem likely to be swayed by government largess. “The position of the regional government is clear, Conga is not going ahead,” Máximo Léon, a top adviser to Mr. Santos, said in a telephone interview.

Conga has gold deposits worth about $15 billion at current prices and would be the biggest investment ever in Peru mining.

Conga has turned into a political nightmare for President Ollanta Humala who took office last year and who has on many occasions publicly backed the project. The bitter dispute is seen as a test case for scores of conflicts triggered by mining investments in the country.

At least 200 communities nationwide in Peru have organized to stop mining or oil projects, usually over environmental concerns or to demand direct economic benefits in rural towns.

Sourced & published by Henry Sapiecha

Chinese malls look for more shoppers

The East Coast basin is “literally leaking oil and gas” and provides potential for thousands of wells, an oil company with exploration permits in the area says.

New Zealand’s main oil and gas producing region is at Taranaki on the west coast of the North Island but Tag Oil says the East Coast basin on the other side of the North Island has “world class upside potential”.

A presentation by the small Canadian-based company on its website says it has identified widespread oil and gas seeps over a large area.

The presentation says the “East Coast basin is literally leaking oil and gas”.

The Sunday Star Times newspaper reported that the company regarded the East Coast as a “Texas of the south” and wanted to pursue an aggressive program there.

Last September the company said it was undertaking seismic testing in the region, with first exploration drilling planned after that. The region is seen as having potential for so-called shale oil extracted from rock.

The company has a farmout deal with Apache for the region, under which Apache may spend up to $US100 million ($A97 million) to earn up to half of Tag’s present 100 per cent share of exploration prospects.

“This is not where New Zealand’s economic future lies. We need to be investing instead in renewable solutions,” says Moana Mackey, Labour’s Energy representative.

Sourced & published by Henry Sapiecha

IN A landmark decision, the Land and Environment Court has held that one of New South Wales’ coalmines in Australia should have to pay to offset some of its greenhouse gas emissions as a condition of operation.

The provisional decision was a win for the Hunter Environment Lobby, represented by the Environmental Defender’s Office, which had appealed to the court over the Minister for Planning’s decision to both consolidate historical consent authorities of the Ulan mine, near Mudgee, and double its operational life and capacity to 2031.

The Xstrata and Mitsubishi-owned Ulan Coal Mines, backed by the minister, and the Department of Planning, had argued that offsetting the mine’s scope one emissions was discriminatory, given that there were at least 50 coalmines operating in NSW.

The government told the court the carbon tax regime was a preferable policy.

The provisional judgment was delivered on November 30, with parties due to thrash out its details and timetable on February 13, before final orders are made.

Justice Nicola Pain found that the power to impose conditions on major infrastructure projects – those captured by the now repealed Part 3A procedure – was wide.

”That this is the first such condition imposed on a coalmine in NSW is not necessarily discriminatory,” she said.

”It is simply the first occasion that has occurred.

”As other operating coalmines seek approval to modify or extend their operations, or new coalmines are opened, it would be open to the consent authority, which may be the minister, to impose a similar condition.”

Law firm Norton Rose, in a briefing update, said the implications of the ”landmark” decision spread beyond the coal industry

Sourced & published by Henry Sapiecha

TIN & TUNGSTEN MINING IN ENGLAND BY WOLF MINERALS

PLANS by ASX-listed Wolf Minerals to become a tungsten and tin producer from its Hemerdon project in south-west England have attracted a rare demonstration of government support for the jobs and wealth creation ability of mining projects.

Wolf announced last week that the support came directly from Lord Green of Hurstpierpoint, the British Minister of State for Trade and Investment, following Wolf receiving planning consents for the Devon development.

In a letter to the company, Lord Green said Hemerdon was an important project to the community in terms of jobs and wealth creation, and to the British and wider European Union in securing supplies of tungsten.

”I am aware that tungsten ranks highly in both the British Geological Society and EU’s critical raw materials lists and that it has unique properties that are impossible to replace in certain specialised industrial applications,” the former HSBC chairman said.

The British Geological Survey in September listed tungsten as one of the top five strategically important metals.

Wolf is now working on securing $80 million in debt funding for the project, the development of which would serve to ease the grip China has on global supplies of tungsten. More than 80 per cent of global supply comes from China, which has curbed exports of the ”strategic” metal.

Tungsten prices rose by more than 30 per cent last year and are now more than eight times their level before taking off in 2003 in response to limited non-Chinese mine supplies at a time of rising consumption.