Gina Rinehart strikes $395m fertiliser deal

Gina Rinehart is embarking on a grand plan with London’s Sirius Minerals.

Gina Rinehart’s latest investment is populated by former executives and financiers to Andrew Forrest’s iron ore powerhouse Fortescue.

Mining billionaire Gina Rinehart is diving deeper in to the feed-the-world thematic, through a $US300 million ($395m) royalty financing deal on a fertiliser project near Whitby in north Yorkshire with London’s Sirius Minerals.

Sirius is populated by former executives and financiers to Andrew Forrest’s iron ore powerhouse Fortescue in its formative years and like that vision, the plans of Sirius are on a grand scale. Its fertiliser project is priced at an initial $US1.09bn, increasing to $US2.9bn on full production.

The royalty deal – it won’t kick in until Sirius has committed funds of $US630m to the project – comes as Mrs Rinehart is in a $370m shoot-out with a Chinese partner for ownership of the S.Kidman cattle empire against a competing over from a consortium of wealthy graziers led by Sterling Buntine.

The Sirius deal involves Mrs Rinehart’s Hancock Prospecting acquiring a 5 per cent royalty stream on the first 13 million tonnes-a-year of polyhalite, a multi-nutrient product (potassium, sulphur, magnesium and calcium) to be produced by Sirius for export markets.

The deal also covers $US50m of shares in Sirius and the right to buy up to 20,000 tonnes of product annually for use at Mrs Rinehart’s Australian agricultural operations. One of Mrs Rinehart’s key revenue streams is a royalty on certain iron ore production by Rio Tinto in the Pilbara.

In a statement released on Tuesday, Mrs Rinehart said the Sirius project “delivers a new and natural product which is relevant to Hancock’s focus on agriculture and after years of field tests and across many crop types, demonstrated improved yields.’’

“Sirius has a large, high quality mineral resource and is located in a stable jurisdiction with a competitive tax rate. I am advised that Sirius is working to progress the project and has the potential to become one of the world’s leading producers of multi-nutrient fertiliser, and could have a life of 100 years – this fits with my approach of investing in strategic areas for the long term, and I hope the product is of assistance to many Australian farmers,” Mrs Rinehart said.

Sirius has gone beyond what would be the case in most mining jurisdictions to win support for the project. Central to reducing its visual impact and ground disturbance, a 37km underground conveyor system is proposed to deliver the fertiliser to the export port.

Hancock chief executive Garry Korte said that the ability to feed the world’s growing population through more efficient, higher yielding agricultural land use, required investment in the “innovative’’ product to be produced at the Sirius project.

“The strong investment fundamentals also meet Hancock’s criteria,’’ he said.

Sirius chief executive Chris Fraser – a former Citibank financier involved in Fortescue’s initial $2.5bn development financing – said the proposed Hancock royalty financing was a “significant vote of confidence in not only our project, but also our product.”