Documents unearthed in the multibillion-dollar row over a lucrative Pilbara iron ore deposit show Gina Rinehart’s Hancock Prospecting and Rio Tinto warned a syndicate of bankers that two mining dynasties may seek royalties, a West Australian court has heard.
Julie Taylor SC, acting for Wright Prospecting, said the extract from Hancock Prospecting and Rio Tinto’s 2005 deal to develop the Hope Downs deposit was proof Rinehart’s mining empire knew it was liable to share its spoils with the family of Lang Hancock’s business partner Peter Wright.
Gina Rinehart is locked in a court battle with the descendants of her father’s business over royalties from a mining tenement in Western Australia’s iron-rich Pilbara region.Credit: Getty
The high-stakes civil trial – which has pitted Australia’s richest woman against Wright’s descendants, engineer Don Rhodes’ company and her two eldest children – was previously told the risk of a royalties row was discussed at a pre-deal board meeting between Rinehart, Rio’s top deal-maker Philip Mitchell and former chief executive Sam Walsh.
It was also accounted for as a liability in the joint venture deal, a burden the two parties allegedly agreed to shoulder together.
But on Wednesday, Taylor told the court they weren’t the only occasions in which Hancock Prospecting flagged the possibility of fellow mining heirs staking a claim to the asset.
She said an intercreditor deed for the joint venture showed Hancock Prospecting and Rio not only provided for the payment of royalties in its transaction documents, but they informed prospective investors of the liability.
“The Hancock Prospecting parties were obviously negotiating in relation to a known risk and how they would accommodate claims by [Wright Prospecting] and Rhodes for royalties or a share of royalties, which proves claims were foreseen,” she said.
“We accept that those claims were not a certainty, but they were plainly envisaged, and Hancock Prospecting’s actions went beyond the mere act of taking out an insurance policy in its discussions with Hamersley [Rio Tinto] in respect of royalties.
“Further potential royalty obligations to Wright Prospecting appear to have been disclosed to a syndicate of large sophisticated bankers who provided external funding to develop Hope Downs 1 and 4.”
Should the court find Wright Prospecting’s claim to be time-barred, Taylor insisted the dynasty should still be handed an account of profits for its share of the royalties, including future royalties.
“Hancock Prospecting has always known of that claim, and have made allowance for it at every stage of their decision-making to proceed with the Hope Downs venture,” she said.
Taylor also declared Wright Prospecting had no intention to disturb Rio’s rights to the asset and insisted its pursuit focused solely on the income, profits and royalties received by Hancock Prospecting and its subsidiaries.
The claim came on the final day of Wright Prospecting’s reply submissions in the civil trial of the mammoth legal battle it has been waging against Hancock Prospecting since 2010.
Wright Prospecting has long claimed it was entitled to royalties from Hope Downs, which is now home to four operational iron ore mines, under a 1980s “Hanwright” partnership deal.
The battle has also pitted Rinehart against Rhodes’ family company, as well as her children, John and Bianca, who claim their grandfather left the mining asset in a trust they were set to inherit.
Hancock Prospecting and Rinehart, however, maintain the Hope Downs assets and their spoils belong to them, insisting they put in the work to obtain the tenements and invest in their development.
Lawyers for DFD Rhodes are expected to begin three days of reply submissions on Thursday.
Justice Jennifer Smith is expected to deliver her judgment in 2024.
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