• Mon
  • Sep 22, 2014
  • Updated: 5:03pm
Lai See
PUBLISHED : Saturday, 23 August, 2014, 1:03am
UPDATED : Saturday, 23 August, 2014, 1:03am

Sino Iron fiasco has Clive Palmer changing his attitude to China


Howard Winn has been with the South China Morning Post for two and half years after previous stints as business editor and deputy editor of The Standard, and business editor of Asia Times. His writing has also been published in the Far Eastern Economic Review, the Wall Street Journal, and the International Herald Tribune. He writes the Lai See column which focuses on the lighter side of business.

Clive Palmer's tirade against China made global headlines earlier this week. But what's got the Australian mining billionaire so fired up? After all, four years ago Palmer was critical of the previous Labor government when Kevin Rudd was prime minister saying its policies made trade difficult for Chinese investors.

In a speech he called the policies "racist" and said there was "a great cry in Australia about Reds under the bed". He called on politicians to be fair and, "to treat the Chinese people and Chinese government with the dignity they deserve". However, his view has evidently soured.

This is almost entirely to do with Hong Kong-listed Citic Pacific's Sino Iron project in Western Australia. In 2006, Palmer sold Citic the right to mine magnetite iron ore in the Pilbara region in exchange for royalty payments. Citic agreed to build the infrastructure, but the "deal of the century", as analysts call it, because it heavily favours Palmer, has taken a heavy toll on Citic. The original budget of US$2.5 billion has blown out to about US$10 billion.

That is not counting the bungled US$2 billion attempt at hedging the company's Australian dollar risk that cost chairman Larry Yung Chi-kin his job. Sino Iron and Palmer are involved in a number of legal actions. But the principal dispute is about the royalties that Citic undertook to pay Palmer's company Mineralogy for shipping the ore. Palmer claims that Sino Iron owes him A$500 million (HK$3.6 billion) in unpaid royalties. Sino does not dispute this, but says the method of calculating it is unclear. The pricing of iron has changed since 2006 when the deal was negotiated.

It was to be a calculation of several things, including - unfortunately - the annual benchmark iron ore prices received by BHP Billiton at its Mount Newman mine, and the annual benchmark iron ore prices received by Brazilian miner Vale. However, that annual "benchmark price" has been abandoned and has moved to daily spot market pricing. The two parties have been unable to agree a formula and the matter is in the courts.

The judge hearing this case had criticised Mineralogy for the numerous changes it has made to its statement of claim. "Mineralogy's numerous, and sometimes very significant, changes to its case have slowed these proceedings down dramatically," the judge said. This seems a bizarre tactic since it delays Palmer's payday. Cash is something Palmer has been desperate to get his hands on as a number of his businesses are losing money and there is the Palmer United Party to fund.

It may be that Palmer has been delaying the royalty hearings until another legal dispute was settled. That is, over who operates Port Preston, from where Sino ships its ore. Preston has been declared a "security" port by the government, which means it requires a manager to oversee security and anti-terrorist measures. Mineralogy was initially put in control but in what represents a serious loss for Palmer, Mineralogy lost this to Sino on appeal this week, which may explain his somewhat wrought state.

Had he been able to control the port he would possibly have been able to disrupt Citic's iron shipments which would have strengthened his hand in his royalty negotiations. Meanwhile, Citic has upped the ante and accused Palmer of fraud in diverting A$12 million cash from an account set up to pay for the administration of the port. Citic says these funds have been used to fund Palmer's election campaign and some of his other mining assets that have been losing money. Palmer denies this but the issue is now in court. The Sino Iron project looked at one stage as if it was going to bring down Citic, but now it's Palmer that's looking wobbly.

Have you got any stories that Lai See should know about? E-mail them to howard.winn@scmp.com


For unlimited access to:

SCMP.com SCMP Tablet Edition SCMP Mobile Edition 10-year news archive



This article is now closed to comments

I Gandhi
Clive Palmer just another mongrel playing the race card. When he's making plenty raping he's cool. When things turn against his callous greed his true colours comes out. A greedy mongrel ****.
Marcus T Anthony
I suggest you look up the meaning of the term "playing the race card". It is used to describe a person who attempts to deflect criticism by accusing the critic of racism - and it implies that the accused is unwilling to accept responsibility for their error or crime. Palmer's rant therefore has little to do with this concept. If you just said it was "racist" that would carry more weight (but so do many of your own posts, and the total number far outweighs Palmer's insults to the Chinese).
I note the Global Times and plenty of others in the Chinese media have acted in a way that might well fit that term. Despite the fact that Palmer was widely condemned in Australia - that's how the story broke - the Global Times used the story to make generalised comments about Australians and their attitude to China. Given that the GT is a government mouthpiece, this is very questionable policy indeed. Why condemn an entire country based on one man's comments - a man who is in a 200 million dollar legal dispute with interests in that country? The GT was VERY specific in using this case to condemn "Australia". This is totally unconscionable, given that Palmer has received no support outside his own little clique. None whatsoever.
No tears for Larry Yung who promptly enjoyed a massive sweetheart property deal making him squillions overnight. His Party connections remain strong enough to keep his snout in the trough.
Olympic Express
A flashy race-horse owner who is now steward of Hong Kong's Jockey Club, Mr. Yung enjoys fine wine & often hunts at his Sussex estate, once owned by Harold Macmillan.
Mr. Yung likes to tell the story of how he mistakenly bet US$50,000 on the wrong horse, which won at 100-1 odds, netting him US$5 million. He has said he gave it away to charity
-& pigs can fly
Daniel Lee
Clive Palmer loves money more than his reputation.


SCMP.com Account