Wright legacy: gift that keeps on giving

From one point of view, Rhodes Ridge is just another proposed Pilbara iron ore project.

A look closer, however, reveals a mine that will change Western Australia.

Marooned for more than 50 years as other mines were developed by its half-owner – London-based mining giant Rio Tinto – Rhodes Ridge emerged from the shadows earlier this month during a series of site visits for finance analysts and media.

Apart from ownership squabbles, the project has a scale issue: it could be so big that it has the potential to grow into twice the size of Rio Tinto’s current flagship, the 40 million tonnes a year Gudai-Darri mine, which started production last year.

In theory, Rhodes Ridge could produce more than 100mt of high-quality ore a year, worth $US11.5 billion annually at the current iron ore price.

Even at its planned starting rate of 40mtpa, Rhodes Ridge could generate ore worth $US4.6 billion a year ($A7.3 billion).

It’s probably not a bad guess to suggest Rhodes Ridge one day will produce an annual profit of between $US2 billion and $US4 billion, after taxes and royalties.

It’s the money aspect of the new mine that is particularly interesting, because Rio Tinto would like to be producing by the end of the decade, a deadline that implies a start on construction around 2027.

Assuming Rhodes Ridge costs around $US4 billion to build, the capital investment will be the first effect on WA.

Future royalties from iron ore sales that will underpin (or boost) the state budget are another significant outcome.

But it’s the effect on the other half-owner of Rhodes Ridge, the family of the late EA (Peter) Wright, that will deliver the biggest changes.

From relative obscurity and without a single obvious leader, Wright’s descendants can expect to be on the receiving end of between $US1 billion and $US2 billion a year from their share of the profits generated by Rhodes Ridge, making them one of the richest families in the world.

The new cash will be added to an existing stream of annual payments from a royalty paid by Rio Tinto on many of its other mines under a deal struck with Wright and his business partner, the late Lang Hancock.

Gina Rinehart, Hancock’s daughter, has used her share of the royalty to build a business empire, which includes her own iron ore assets, oil and gas production and a new-found interest in lithium.

History is likely to repeat (with variations) because the two branches of the Wright family with clear access to the current royalty cash and the future half-share in Rhodes Ridge will have different opportunities and investment preferences.

Mining and property are likely to be at the top of the list.

However, there is also no doubt that an annual injection of up to $US2 billion ($A3.2 billion) into the hands of already wealthy people will have a significant effect on top-end housing as Wright family members make their property statements.

Consolidation of existing prime real estate is likely as ‘family compounds’ are developed in the same way another iron ore billionaire, Andrew Forrest, is doing in Cottesloe by joining oceanfront titles into a single mega-residential complex.

Valuing the Wright family after it hits the big time with Rhodes Ridge will not be easy because the fortune could be spread between 20 or more people who might have a claim to the revenue flowing into the master company, Wright Prospecting.

Currently, the senior member of the Wright dynasty is Angela Bennett, one of Peter Wright’s three children.

Michael, the oldest, died 11 years ago.

Julian, his brother, is estranged from the family.

Earlier this year Ms Bennett’s fortune, based almost solely on the historic Rio Tinto royalty payment, was valued by Forbes magazine at $US1.55 billion ($A2.5 billion) enough to qualify as Australia’s 34th richest person.

After 2030, when the Rhodes Ridge cash starts flowing, it’s easy to see Ms Bennett and the rest of the Wright family being valued at more than $US20 billion, using a 10-times multiple for selling a high-quality flow of cash plus adding the existing royalty.

That could mean a Wright family value of around $A32 billion, taking the title of Australia’s second biggest fortune after Mrs Rinehart while also eclipsing Mr Forrest.