Hancock Prospecting posts $7.3bn profit

Gina Rinehart’s private company has posted an 80 per cent jump in annual profit to a mammoth $7.3 billion, underscoring her ranking as Australia’s wealthiest person.

Hancock Prospecting’s higher profit was driven by the boom-time iron ore prices that prevailed for most of the year to June 30.

The company also revealed big gains from its share portfolio and outlined a range of growth projects it is pursuing.

Hancock’s bumper profit follows the release of similar boom-time profits by ASX-listed iron ore miners Rio Tinto, BHP and Fortescue Metals Group.

The difference is that Mrs Rinehart has a direct 76.55 per cent stake in the company, giving her an estimated net worth of more than $30 billion, according to recently published ‘rich lists’.

The remaining 23.45 per cent interest is held by her four children - John Hancock, Bianca Rinehart, Hope Welker and Ginia Rinehart – through The Hope Margaret Hancock Trust.

Hancock’s latest profit of $7.3 billion was derived from total revenue of $16.6 billion and was after paying tax of nearly $3 billion.

The profit was up from $4.1 billion in the prior year and just $443 million in FY16.

The largest contributor to Hancock’s profit was its 70 per cent owned subsidiary Roy Hill Holdings, which last week announced a $4.4 billion annual profit.

After paying out all debt, Roy Hill declared $4.1 billion of dividends during the financial year, with a further dividend of $1.5 billion declared on 30 September.

A second big contributor was Hancock’s 50 per cent stake in the Hope Downs iron ore joint venture which is operated by Rio Tinto.

The Hope Downs mines continued to operate at capacity, producing 49.6 million tonnes in FY21.

A third contributor to Hancock’s profit was its wholly-owned subsidiary Atlas Iron, which announced earlier this week it had doubled annual profit to $938 million.

Another positive for Hancock was its decision to establish an equities investment portfolio during the year with a focus on ‘future metals such as copper, rare earths and lithium.

The company said this strategy produced an overall return of more than 60 per cent, with the initial investment of $669 million worth $1.07 billion by June 30.

Iron ore royalties (stemming from deals negotiated by Mrs Rinehart’s father Lang Hancock) contributed 2.5 per cent of total income, or $415 million.

As well as its mining operations, Hancock is well known for its expansive pastoral interests, held through S. Kidman & Co.

This part of the business made a very small contribution to earnings, with annual revenue of $67 million and a net profit of $11.5 million.

Looking ahead, Hancock said its Roy Hill subsidiary was continuing to debottleneck its mining, processing, rail and port systems to lift capacity to more than 60 million tonnes per annum – up from the 57.5mt it shipped last year.

Atlas Iron is also focused on growth, with its forecast 10 Mtpa McPhee Creek deposit progressing through its feasibility study.

The company is planning to use rail infrastructure to transport the ore to port, meaning lower operating costs compared to its current trucking operations.

Hancock said the Atlas resource base complements Hancock’s existing business and will assist in extending the operating life of Roy Hill.

It added that studies are continuing on the Bedded Hilltop and Hope Downs 2 deposits to underpin long-term production.

Hancock’s own growth projects include Mulga Downs, where it has commenced a pre-feasibility study after completing more than 500,000 metres of drilling.

Outside of iron ore, Hancock has a big investment in a polyhalite project in England, is seeking approvals to build a coal mine in Canada and is exploring for copper and gold in Ecuador and Victoria.

Hancock’s very strong profits over the past three years have allowed the company to repay nearly all of its debt.

Its gearing ratio (debt to equity) has been cut from 55 per cent to one per cent over the past three years.

As a result of disputes between Mrs Rinehart and some of her children, Hancock has withheld most of its dividends.

While it has paid discretionary dividends of $818 million since 2015, it has put a further $4 billion into provisions.