Mitsui, one of Japan’s biggest companies, has gone against conventional thinking to dive deep into iron ore, adding $5.3 billion to the fortune of an already wealthy Australian family in the process.
The counter cyclical investment, made as the iron ore price is falling, sees Mitsui buy a 40% stake in an undeveloped giant iron ore deposit in the Pilbara region of Western Australia from the descendants of the late Peter Wright.
The deal will see the Wright family close the gap with Australia’s richest person, Gina Rinehart, who’s $29.6 billion fortune is also based on iron ore discovered by her late father, Lang Hancock, who was Wright’s mineral prospecting partner.
It was iron ore discoveries made by Hancock and Wright in the 1950s which laid the foundations of the fortunes now enjoyed by the families, but it was Asian demand for steel which turned millions of dollars into billions.
Mitsui was an early investor in Australian resources, especially iron ore and coal, and has developed close trading relationships in Australia but nothing comes close to the deal struck last week with Wright family interests in what is believed to be Mitsui’s biggest investment in its modern history.
Multiple Family Members Benefit
Multiple members of the Wright family benefit from Mitsui’s investment.
Angela Bennett, a daughter of Peter Wright, gets $2 billion for selling a 15% stake in the Rhodes Ridge iron ore deposit. She will retain a 10% interest in the project which is not expected to produce first ore before 2030.
Two of Wright’s granddaughters, Leonie Baldock and Alexadra Burt, share $3.4 billion for selling their full 25% in Rhodes Ridge.
The big Anglo Australian mining company Rio Tinto, which has a 50% stake in Rhodes Ridge, is managing the planning and design for the development which will export ore via Rio Tinto’s existing rail and port system.
The new ownership structure of Rhodes Ridge, a 6.8-billion-ton deposit of high-grade ore, will be 50% Rio Tinto, 40% Mitsui and 10% Angela Bennett through her company, AMB Holdings.
Mitsui chairman, Kenichi Hori, described Rhodes Ridge as “the last remaining crown jewel in the Pilbara”.
He also dismissed concern that the iron ore price would fall steeply because of possible flood of supply as demand slows in China where steel consumption is reported to have peaked.
“Strong growth in steel production is expected in India and South East Asia leading to expectations for a continued long-term increase in global steel production,” Hori was reported telling Australian media, adding that there is expected to be an iron ore supply shortage.
Mitsui has been developing a relationship with the Wright family for more than 20 years thanks to its interest in Rhodes Ridge which is being designed to produce 40 million tons of iron ore a year for an initial 25 years but could theoretically be in production for more than 100 years.
Read the full article here
