31/10/2018 - 23:11

Hancock Prospecting posts $1.37bn profit

31/10/2018 - 23:11

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The money-making power of Gina Rinehart’s mining business has been abundantly demonstrated in the group’s latest financial results, with her private company Hancock Prospecting lifting annual net profit 28 per cent to $1.37 billion.

The money-making power of Gina Rinehart’s mining business has been abundantly demonstrated in the group’s latest financial results, with her private company Hancock Prospecting lifting annual net profit 28 per cent to $1.37 billion.

This was off the back of a 36 per cent lift in revenue to $6 billion for the year to June 2018, according to a statement issued last night.

The key drivers behind Hancock’s earnings were its 70 per cent stake in iron ore miner Roy Hill Holdings and its 50 per cent stake in the Hope Downs iron ore joint venture.

Roy Hill's net profit for the year was up 69 per cent to $558 million, according to a statement posted n its web site.

Operating sales revenue was up by a similar percentage to $3.84 billion.

This reflected an increase in iron ore sales from its Pilbara operations to 51 million tonnes from 31 million tonnes in FY17.

The Roy Hill mine achieved nameplate capacity of 55mtpa in September 2017, and assuming it sustains that level, annual output will be even higher in the current financial year.

Hancock said it has not yet received any dividends from Roy Hill, with cash flow from the Roy Hill project being utilised to pay down debt.

The Hope Downs mines (operated by co-owner Rio Tinto) continued to operate at or above their 45mtpa nameplate capacity for the 2018 financial year.

Hancock said its Roy Hill operation was largely insulated from the increasing discounts applied to lower grade iron ore.

“The impact on ore produced by Roy Hill, which is priced on the higher grade 62% index was much more limited, with Roy Hill ore continuing to achieve more than 90 per cent of the 62% Platts Index on average over the year,” the company stated.

Hancock said its 67 per cent owned subsidiary Australian Outback Beef, which owns 100 per cent of cattle station business S. Kidman & Co, reported a significant increase in revenue to $51.1 million. The beef company’s underlying net profit before tax increased to $10.1 million.

Hancock owns 10 cattle stations in its own right but did not reference these in its statement.

The group said it has used its strong earnings to reduce debt, with its gearing ratio falling to 71 per cent from 86 per cent.

Total liabilities were $9.4 billion at June 30, including borrowings of $6.9 billion.

Hancock has also paid big dividends to its shareholders. Mrs Rinehart is the majority owner while her four children - John Hancock, Bianca Rinehart, Hope Welker and Ginia Rinehart - hold a 23.4 per cent interest via The Hope Margaret Hancock Trust.

The group paid $191 million in dividends last year but more notably, it provided for a further $338 million in dividends that were not paid.

The latter amount brought to  $1.25 billion the amount that Hancock has put aside over several years for future dividend payments.

However, these dividends have not been paid because of a long-running legal dispute between Mrs Rinehart and two of her children - Bianca Rinehart and John Hancock.

The company said it paid $860 million in Australian federal and state taxes during FY18.

It made multiple investments over the past year, including exploration at its established iron ore projects and grass roots exploration on copper and gold tenements in Ecuador.

It acquired small iron ore miner Atlas Iron for $418 million and invested in UK-based Sirius Minerals and Canada-focused Riversdale Resources.

“The Atlas business will be complementary to Hancock’s Roy Hill project and is expected to assist in substantially extending the operating life of Roy Hill,” the company said.

The group said it is also pursuing targeted acquisitions in the beef industry.

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