Palmer Open to Talks With Rinehart on Coal Mine Plans

By Jesse Riseborough and Heidi Couch

Nov. 23 (Bloomberg) -- Billionaire Clive Palmer would consider sharing port and rail lines with Australia’s richest woman Gina Rinehart to cut the combined A$15 billion ($14 billion) cost of their two Queensland coal projects.

“If she’s got a couple of billion dollars and she’d like to put it down on the table, we’re happy to share infrastructure,” Palmer, 55, said in an interview in Brisbane, adding he hasn’t had talks with Rinehart. “If she hasn’t got the cash we’ll have to wait until she gets it.”

Palmer and Rinehart are seeking to fund coal and iron ore projects in partnership with Chinese state-owned enterprises to tap surging demand after iron ore and thermal coal prices tripled this decade. Palmer is seeking as much as $3 billion in the initial public offering of Resourcehouse Ltd. in Hong Kong.

“There’s scope for savings on both ends, it is just a matter of whether they can come to commercial terms” on port and rail, said Andrew Harrington, an analyst at Patersons Securities Ltd. in Sydney. “If you’ve got more trains running on the same bit of track it makes the unit costs lower so I think there is scope for savings.”

Resourcehouse is aiming to start building the China First coal mine, port and rail project in the Galilee Basin in Queensland next year and has agreed sales accords with Metallurgical Corp. of China Ltd., which will also help arrange financing.

“China First coal has got the right to mine 1.4 billion tons of coal, which is enough to keep Hong Kong fires burning for the next 20 to 40 years,” Palmer said in the Nov. 20 interview. “That’s just the beginning.”

Rinehart’s Project

Rinehart’s Hancock Prospecting Pty. is seeking to start a coal project in 2012 and has sought Chinese partners to help develop it. Hancock director Tad Watroba couldn’t immediately be reached for comment.

Palmer has been gauging demand for a $2 billion to $3 billion Hong Kong IPO for Resourcehouse being managed by UBS AG and Macquarie Group Ltd., according to a preliminary share sale document e-mailed to fund managers Nov. 9. It’s in talks with Export-Import Bank of China for A$5.5 billion in debt funding for the coal project and has signed sales accords with unidentified Chinese state-owned power companies, Palmer said.

China Metallurgical has agreed to buy a 10 percent stake in the project for between A$700 million to A$800 million. It’s also agreed to purchase 75 percent of the estimated 40 million tons a year in sales from the mine, he said.

Fortune Doubled

Palmer, Australia’s fifth-richest person and chairman of Resourcehouse, was the only person in the top-10 of Business Review Weekly Magazine’s annual rich 200 list whose wealth increased last year. Palmer’s fortune more than doubled to A$3.4 billion, according to the list that was published in May. He also owns the Gold Coast United soccer club.

Rinehart is chairwoman of closely held Hancock, founded by her father Lang who discovered the mines that made Australia the world’s biggest iron ore exporter. She is Australia’s fourth richest person with an estimated wealth of A$3.5 billion.

Hancock’s Alpha mine is estimated to produce 30 million tons of power station coal a year for at least 30 years and the project is estimated to hold in excess of 3.5 billion tons of the fuel, according to a presentation on Hancock’s Web site. The railroad is estimated to cost A$2.5 billion, the mine will cost A$3 billion and the port will cost A$2.5 billion.

Macquarie said in a Nov. 6 report the China First mine is estimated to cost A$3.4 billion, rail A$2 billion, port and infrastructure at A$1.8 billion and other project costs at about A$300 million.

Resource IPOs

Resourcehouse’s potential IPO comes as United Co. Rusal, the world’s largest aluminum maker, studies raising as much as $3 billion in a Hong Kong IPO by December, two people familiar with its plan said last month.

“If there is going to be an IPO in Hong Kong we will have to get a good response from investors to raise the sort of funds that we will need to do in the public market,” Palmer said.

Palmer is seeking to tap investor demand for coal and iron ore producers after the Bloomberg World Mining Index almost doubled this year because of a rebound in demand for commodities, driven by China. This quarter may be the busiest for Hong Kong IPOs since the U.S. subprime-mortgage market collapse triggered a global stocks rout in 2007.

“We’ve been very successful doing deals outside IPOs and extracting good value,” Palmer said. “To be attractive an IPO has got to be able to be a better financial alternative. I’m not sure whether they are or not at this stage.”

To contact the reporters on this story: Jesse Riseborough in Melbourne at jriseborough@bloomberg.net; Heidi Couch in Sydney hcouch@bloomberg.net.