Royalties to roll in for Palmer

CLIVE Palmer's Resourcehouse Ltd, which is seeking $3.6 billion from a planned listing on the Hong Kong stock market, could deliver his private companies more than $1 billion in royalties and fees over its first three years of coal and iron ore production.

Clive Palmer

CLIVE Palmer's Resourcehouse Ltd, which is seeking $3.6 billion from a planned listing on the Hong Kong stock market, could deliver his private companies more than $1 billion in royalties and fees over its first three years of coal and iron ore production.

Resourcehouse's planned China First projects will involve Mr Palmer effectively "renting" slabs of his Galilee Basin coal areas in Queensland and his West Australian iron ore tenements to Resourcehouse.

They are big deals, with Resourcehouse having a right to mine 1.4 billion tonnes of coal in the Galilee and 10 billion tonnes of magnetite in WA.

Mr Palmer will remain the group's landlord, for rather than selling his mining tenements to Resourcehouse he has granted it "mining rights", and the group's prospectus says it has agreed to pay his Waratah Coal rent in the form of a royalty of 30c per tonne of coal it ships from Waratah's Galilee Basin coal tenements.

These are currently only exploration areas and must advance their status to mineral development areas and then mining leases.

The prospectus says Resourcehouse expects the coal royalty to cost $25 million a year over the first three years, before it is reassessed.

It also says Resourcehouse expects to pay $15 million a year in iron ore royalties to Mr Palmer's Mineralogy group once the WA First China Iron project gets under way.

There will also be access and administration payments to Mineralogy by China First Iron - the former $US15 million a year until $US45 million has been paid, and the admin fee being $US15 million a year.

But Resourcehouse's prospectus says payments to Mineralogy for access to the China First Iron project "will (total) approximately $US310 million" for each of the financial years ending June 30, 2011, '12 and '13.

About $250 million of that would be passed on to help pay for the port development at WA's Cape Preston, which is expected to service Resourcehouse's iron ore operation as well as the Sino Iron project, which is already being developed by Chinese group CITIC on another part of Mr Palmer's WA tenements. Another $30 million is for "operational and maintenance costs" for the port and other infrastructure.