Aussie Mining Magnate To Make Billions on Smog

Mining is not a clean business, not in any sense of the word. Any casual observer of Australia’s rough and tumble (and highly-lucrative) minerals industry can tell you that. With its risky, dirty, dangerous nature, the job is a casting call for renegade businessmen, modern-day prospectors willing to take huge bets in the punishing outback for a shot at landing among Australia’s richest. And these days no one’s representing the latest class of hungry axe-swingers better (or more colorfully) than Clive Palmer.

A real estate mogul-turned-miner, Palmer has spent the past two decades hustling in the minerals market, snagging various iron ore, nickel and coal assets with an eye towards forging a long-term supply contract with energy-starved China, the holy grail of export partners. And over the weekend, he finally got it. Almost.

Clive Palmer, a 55-year-old businessman, harness-racing enthusiast and poet, on Saturday announced a deal in which the Export-Import Bank of China will arrange US$5.6 billion of the $8 billion in financing he needs to build his planned megamine, dubbed “China First,” in Australia’s Queensland state.

China Power Investment Corp. agreed to buy 30 million metric tons of coal annually from the project for 20 years, further increasing the odds the mine will be developed.

Via Australian Billionaire Gambles on China – WSJ.com.

Quick back-of-the envelope math on that deal: at coal’s current price of roughly $90 per metric ton, China First could reap Palmer $54 billion over the term of the contract. China First indeed.

Though this deal’s far from done- notice that Export-Import Bank is ponying up only 70% of what it will cost to build what would be the country’s biggest coal mine- Palmer has a plan. The other $3 billion or so will be raised next month in a public offering of shares in his company Resourcehouse (who owns the rights to the proposed mine). He’s already lined up state engineering firm Metallurgical Corp. of China to dig the big hole and the Aussie government is said to be set to fast-track federal approvals- purportedly due to the economic boost the deal would bring to rural, inner Queensland.

Palmer calls it “the project of the century.” And he’s no stranger to hyperbole. In fact, his rather blustery track record when it comes to business dealings might be worth a closer look. The portly mogul spent most of last spring touting the impending $5 billion-IPO of Resource Development International, a new holding comprised mainly of an undeveloped magnetite iron ore mine in Western Australia. But analysts were skeptical about the quality of magnetite, the float was delayed and by July, officially shelved.

Lucky for him, his other antics successfully distracted the press from dwelling much on the business failure. We were too busy reporting on his self-funded launch of a brand-new soccer team, his efforts to revolutionize harness racing in Australia, his defamation lawsuit against a Queensland politician, his record donations to other political parties, the $5 million  yacht be bought for his 15-year old daughter and the time he called Australian authorities “racist” for spurning business deals with China- mere months after he accused the Chinese of deliberately slowing their economy in order to quash commodity prices.

So while China First could certainly be a massive boon to Australia’s export revenues, make Palmer wildly rich and help China grow dirtier, faster, there are sizable hurdles still ahead. As the Journal noted, the mine will require significant logistical investment (it’s located 300 miles inland) and the Resourcehouse shares need a lot of eager buyers. I think I will pass.