The billionaire Rinehart and Wright families have scored a multi-million dollar High Court win against mining giant Rio Tinto over iron ore royalties derived from the Pilbara.
The billionaire Rinehart and Wright families have scored a multi-million dollar High Court win against mining giant Rio Tinto over iron ore royalties derived from the Pilbara.
The High Court ruled today that Rio Tinto subsidiary Mount Bruce Mining (MBM) is liable to pay royalties to Mrs Rinehart's Hancock Prospecting and joint venture partner Wright Prospecting in relation to iron ore mined in the Eastern Range and Channar areas of the Pilbara.
The High Court dismissed an appeal from the NSW Court of Appeal in relation to a tenement sale agreement reached in 1970 between Mrs Rinehart's father, Lang Hancock, and his business partner Peter Wright about the payment of royalties by MBM.
The High Court said under the terms of the 1970 Agreement, MBM was assured of an exclusive opportunity to exploit an area of land allocated to it irrespective of the nature or terms of the tenement authorised by the state.
"In return for that opportunity, Hanwright was assured of the payment of royalties upon the proceeds of that exploitation," the judges said.
They said the issue was resolved by the "overriding criterion" of how reasonable businesspersons would have understood the term of the agreement.
"We agree that Hanwright's interpretation of each of the disputed terms is to be preferred," the judges said.
Hancock and Wright previously won a $130.8 million legal claim for royalties against Rio subsidiaries Hamersley Iron and MBM in the Supreme Court of NSW.
However, the NSW Court of Appeal allowed an appeal, saying that they were not entitled to royalties in respect of ore being mined from Channar.
Rio Tinto had argued that MBM was not liable to pay the royalties because it temporarily lost control of the tenements.
Rio produces about 10,000 tonnes of iron ore per year at its Channar mine, out of total Pilbara production around 290,000t.
One of its biggest mines is Hope Downs, jointly owned by Hancock Prospecting and named after Mrs Rinehart's mother, Hope Hancock.
Lang Hancock and Peter Wright played a lead role in discovering multiple iron ore deposits in the Pilbara in the 1950s and 1960s.
Their descendants, including Mrs Rinehart, the late Michael Wright and his sister Angela Bennett, have since reaped multi-million dollar annual royalty payments from Rio's operations.
Meanwhile, the $10 billion Roy Hill project, which is being led by the Rinehart company Hancock Prospecting, is expecting to ship its first iron ore in coming weeks.
Initially scheduled to be completed in September, the project was expected to deliver its first shipment in October.
Roy Hill now says the first shipment from the Pilbara will occur after October 21.
Executive director Tad Watroba said minor delays to large projects were not unusual, and equity partners and lenders in the project were fully aware of the schedule and were supportive.
"For projects of this scale and complexity it is not unusual for minor slippages such as this," Mr Watroba said.
First shipments will come amid concerns about an economic slowdown in the world's second largest economy, and resulting weaker iron ore prices.
"Roy Hill has worked hard to ensure that its cost position remains in the lowest quartile of the industry cost curve and therefore will be competitive in the changing market environment," Mr Watroba said.
Half of Roy Hill's planned 55 million tonne output would be taken by minority investment partners outside China, he added.
Almost 90 per cent of Roy Hill's product is already under long-term contract, so very little ore will enter the spot iron ore market, Mr Watroba said.
The company has a significant revenue advantage over competitors who were shipping lower quality products, and inconsistent grades, he said.
