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Clive Palmer

Clive Palmer
Based in Brisbane
Active in Australia
Targeted base metals, energy fuels

Clive Palmer (actually Professor Clive Palmer) is not an anomaly as such. He follows in the tradition of extremely wealthy Australian mining magnates, such as Lang Hancock, Alan Bond, Robert Champignon de Crespigny and Andrew Forrest (see Forrest Group International), by putting his money where his mine mouths are.

( Gina Rinehart did the reverse: she inherited a small mining fortune from her father, Lang Hancock, which has now made her the richest woman in the antipodes).

Palmer is probably the only one of his ilk to hold a professorship, and his investments have certainly proved of distinction (financially, if not academically speaking), until recently.

In early 2010, Palmer launched his Resourcehouse Ltd finance company on the Hong Kong stock exchange, aiming to raise US$3 billion in order to promote a coal project in Queensland, and iron ore mines in Australia [MJ 4 February 2010]. The Metallurgical Corp of China had earlier promised to invest US$200 million in Resourcehouse [MJ 15 January 2010].

As of November 2010, this major IPO had still not gained the go-ahead from the Hong Kong SE and - according to Reuters - Palmer had "never confirmed details" of it. However, he did claim that investment banks BOC (Bank of China) International, Credit Suisse and JP Morgan were "working on the possible listing" [Reuters 19 November 2010].

Another attempt to launch Resourcehouse on the Hong Kong Exchange, in the form of an initial public offering (IPO), faltered in May 2011 - in the same week as Glencore made its own IPO on both the London and Hong Kong exchanges, though Palmer said he would try again soon [MJ 20 May 2011].

And so he did - a week later, when he published the company's Prospectus, which priced a sale of 5.7 billion shares, giving a possible Resourcehouse market capitalisation of US$7.1 - US$7.8 billion. The Prospectus also stated that the new company would seek debt financing for around 70% of its China First iron-ore project from "one or more Chinese entities".

Through his Mineralogy Pty Ltd holding company, in 2009 Palmer owned 66.37% of Australasian Resources Ltd, a major iron ore producer in Australia, and he controlled Resource Development International Ltd., based in the UK's Midlands region.

He also effectively owns Gladstone Pacific Nickel which, in July 2009, was looking to bid for control of BHP Billiton’s nickel refinery operations in Australia [WA News, 3 July 2009], 55% of which it aer acquired. See also: Resource Development Capital Ltd.

However, in July 2011, a co-founder of Gladstone Pacific Nickel launched legal action against Palmer for damages that could exceed $500 million, accusing him and three wholly-owned Palmer companies of acting in breach of his director duties owing to GPN, when he acquired the refinery [Business Spectator, 29 July 2011].

On November 4 2010, Palmer's office was blockaded by environmentalists protesting against the threatened bulldozing of a central Queensland nature refuge, to make way for his latest coal project, dubbed China First; titles to which are held by Waratah Coal and Mineralogy Ltd (see below) [MJ 3 June 2011]. This huge Aus$8 billion open-cut mining enterprise is partnered between Palmer's Waratah Coal and the China Metallurgical Corporation [The Australian 3 February 2010].

Chanting "No more coal, protect nature refuges, stop big Clive," the November protestors claimed the project would bulldoze the 8000-hectares Bimblebox Nature Refuge, destroying the homes of more than 100 species of fauna and flora [AAP, 5 November 2010].

In December 2010, Palmer announced that Waratah Coal had signed an agreement with indigenous groups, holding registered native title in the area whereby - ahead of mine construction - the company would be required to develop a cultural heritage management plan. Palmer said his company had already signed an initial plan with the Jangga people, who have a claim to about 150km of the rail project, linking the mine with a new port terminal [minemsn., 13 December 2010].

Sink or swim?

In April 2012, Palmer announced plans to rebuild the ill-fated transatlantic liner, Titanic and also contest the parliamentary seat held by Wayne Swan, the Deputy Prime Minister of Australia, by running as a candidate in Australia’s conservative Queensland’s Liberal National Party (LNP).

If (or when) "Titanic II" actually launched, the Chinese navy was invited to accompany the ship on its "maiden voyage" from England to New York [ 30 April 2012]. Now, there's virtually no prospect of this happening.

Palmer's long-awaited and postponed IPO of Resourcehouse Ltd, has also not materialised. And, in May 2012, he cancelled a US$40 billion coal supply agreement with coal trader, Vitol, which hardly helped [MJ 18 May 2012].

In May 2013, Palmer announced that he would launch a TV advertising campaign to raise awareness of his as-yet unregistered United Australia Party (UAP) - a rather bizarre mix of rightwing (if not racist) policies and enterprise economics.

Commented Business Specator: "One of the big questions about the UAP is to what extent it will be taken seriously by voters as a party, rather than as one man effectively paying to build a party apparatus around himself...There seems little chance now that the whole Palmer affair is a bluff. Three former or sitting Queensland MPs have put their names to his ticket, the campaign is ready to roll, and Palmer has assured reporters that the party registration process in on track" [Business Spectator 3 May 2013].

But, asked Business Spectator:"[I]s there any real advantage flowing from Palmer’s billions as he tries to get a party up and running in a very short time?...Though light on detail, UAP’s plan to fly refugees to Australia in droves and then fly them back if they are found not to be refugees, might appeal to voters who have been whipped into a state of anxiety about an armada of boats landing on our shores.

"So too, the plan to open up value-added downstream processing of Aussie minerals, so we ship out more of the iron/steel/aluminium and less of the ores. That sounds good until the mix of economic barriers to such a move are considered – those industries are currently going out of business, not clamoring for more capital to open up more...

"Australia does need another party to stir the policy pot. It doesn’t need an autocratic billionaire stirring trouble for fun..."[Business Spectator 'ibid].

The Chinese spat

In early summer 2014, Palmer accused his former business partner CITIC Pacific (see CITIC Bank) which operates Australia’s largest magnetite iron ore mine in Western Australia, "of taking the country’s resources without paying its proper dues (ie not giving him enough money),according to Business Spectator" [Business Sectator 2 June 2014].

"The dispute is centred on how to calculate the so-called Royalty B, which includes, among other things, the now defunct long-term benchmark price for iron ore. CITIC Pacific has also claimed that Palmer siphoned off the company's funds to pay for his election campaign costs"

"Against the background of constant sniping between the eccentric mining baron and a powerful Chinese state-owned enterprise, Australian political and business leaders are ringing alarm bells about the consequences for the bilateral relationship".  

Among these critics were Colin Barnett, the WA premier, who said that 'Clive has damaged our relationship with China. To put it bluntly, the Chinese hate Clive Palmer. In their view, and I think they are right, he’s taking unfair advantage of an agreement … and he is trying to get more money out of them than was originally negotiated'

Queensland deputy premier Jeff Seeney "also slammed Palmer’s antics, saying he has damaged the all-important economic relationship with China: “Clive Palmer is an embarrassment to Queensland and an embarrassment to Australia'”

An unnamed CITIC executive was quoted as saying 'Clive Palmer is exploiting legal technicalities under the Australian laws to swindle money from us and it will have grave consequences for foreign investors and in particular Chinese investors' [Business Spectator, ibid]

Concluded Business Spectator: "Luckily, a senior CITIC executive said the company still retains its faith in the Australian legal system but also added it would have to reconsider how it invests in the future...The really important question to extend is: do Chinese investors see Palmer as part of the government?

"So far, he has largely been viewed as a maverick mining baron with a seat in parliament. But this is about to change. Palmer’s senate bloc is predicted to share the balance of power in the federal upper house after July, with the likelihood of being able to influence legislation and policy. Given his past erratic behaviour, there is no guarantee he will not use that power to his advantage. It would be seriously concerning for an Australian politician to use his political power to strengthen his commercial position against a foreign investor".

A fortnight later, Palmer’s own senior employees were warned under anticipated legal orders, that they would need to reveal details of their work contracts, duties and all payments from an account held more than $12 million in ­Chinese funds before it was allegedly wrongfully siphoned out.

Documents obtained from Australia's Federal Court showed that hundreds of thousands of dollars in super­annuation, salaries and other ­entitlements for employees of his company Mineralogy was paid with funds alleged to have been taken from the disputed bank account. The funds were allegedly also used to pay for the work of other companies [Business Spectator 18 June 2014].

Other documents, obtained from the Supreme Court in Brisbane provided "a glimpse of an ongoing and secret investigation being run by a retired judge, in charge of closed-door ­arbitration proceedings, to trace more than $12m taken in two lump sums last year without ­Chinese permission" [Business Spectator ibid].

CITIC Pacific, which is pursuing the funds, "wants to know whether its money was wrongfully used to bankroll the Palmer United Party’s electoral campaign. A sum of $10m was withdrawn from a National Australia Bank account in August and a further $2.167m came out of the same account in September, days before the federal election.

"..The terms of the legal order suggest lawyers for Mr Palmer, who has strenuously denied any wrongful expenditure, have not volunteered these key documents to the arbitration proceedings or do not have them in their ­possession...The staff will be drawn in as the investigation seeks to determine how much Chinese money...funded salaries, superannuation and other perks for people who were working for Mr Palmer and Mineralogy, and not for Citic ­Pacific...The Mineralogy-controlled bank account was set up for the sole purpose of funding the operation of the Cape Preston port in Western Australia’s Pilbara ­region, but Citic Pacific suspects the $23m it has deposited has been paying for Mr Palmer’s ­separate commercial and political interests" [Business Spectator ibid].

Nearly six months later, the barney between CITIC and Palmer appeared close to finish - with the Chinese conglomerate winning at least one stage in its arguments.

In a ruling handed down late in late November 2015 by the West Australian Supreme Court,judge John Chaney permanently stayed two legal ­actions launched by Palmer earlier in the year, slamming Mineral­ogy for "attempting to circumvent the role of the court". [The Australian, 30 November 2015]

Justice Chaney "found that the two new claims overlapped with an existing ongoing matter between Mineralogy and Citic, and instead had been designed to get around court-imposed rules restrict­ing how Mineralogy could make changes to one of its legal cases.

Added the judge:“In the absence of any satisfactory explanation, the commencement of two additional actions to litigate issues which are already raised in, or where a complete remedy is available in, and existing extant action, is vexatious and an abuse of process...In this case the explanation for separate actions is to circumvent procedural requirements ... (Mineralogy’s) unilateral assumption that those procedural ­requirements will ultimately be resolved in its favour is not a justification for that circumvention” [The Australian, ibid]

This somewhat abstruse legal ruling was complicated further, after Palmer's lawyer, Simon Couper QC, told the West Australian Supreme Court that Mineralogy faced a “drop-dead date” at the end of the following week and "urgently needed a trial into a new matter in which Mineralogy is seeking an interim cash payment from Citic. With Mr Palmer’s other commercial ventures all appearing to be struggling to make money, there are concerns about the financial health" [The Australian ibid].

Commented The Australian:

"Mineralogy and Citic are embroiled in a series of legal disputes relating to their unhappy partnership over the Sino Iron mine in Western Australia. Citic paid Mr Palmer $US415 million in 2006 for the rights to mine at Sino Iron and has spent about $12bn developing the mine, which has been significantly more costly and far less productive than expected.

"While the decision is a significant setback for Mr Palmer’s $10bn claim, the matter is not dead in the water. Justice Chaney noted Mineralogy still had the opportunity to apply to the court for leave to amend its claim in its long-running legal battle over the so-called Royalty B payment. The Supreme Court ruled last year that Mineralogy could not adjust its case in the Royalty B dispute without leave from the court, after Mineralogy made eight amendments in just 16 months.

"The Royalty B from Sino Iron is potentially worth tens,if not hundreds, of millions of dollars a year to Mr Palmer but it has been stuck in the courts after the international iron ore price benchmark used to calculate the royalty was scrapped" The Australianibid].

This certainly isnt the last we have heard of one of the most colourful and controversial Austrialian capitalists to have embroiled himself in the country's mineral industry.

And that's saying quite a lot!