Rio Tinto caught in the middle of war between Australian mining dynasties

Rio Tinto has been dragged into a high-stakes trial pitting the billionaire descendants of Australia’s mining pioneers against each other.

Lawyers for the Anglo-Australian firm have been in the state’s Supreme Court seeking to fend off claims over billions of dollars in iron ore royalties that flowed from discoveries made as far back as the 1950s and 1960s.

The bitter row centres on the Hope Downs complex in the Pilbara region, four open pit iron mines jointly owned by Rio’s Hamersley Iron subsidiary and Hancock Prospecting since they went into partnership in 2005.

Hancock is run and controlled by Australia’s richest person Gina Rinehart. who is worth an estimated £17.8billion.

She took over after the death of her father Lang Hancock, a former asbestos miner who laid claim to discovering the world’s largest iron ore deposit in 1952 when he noticed the rusty brown colour of a gorge while flying over the remote Pilbara region in north-west Australia.

Joint venture: The Hope Downs complex in the Pilbara region, four open pit iron mines jointly owned by Rio Tinto’s Hammersley Iron subsidiary and Hancock Prospecting

In return for developing and operating the mines, named after Hancock’s second wife Hope, Rio Tinto receives half of the royalties since they became operational in 2007.

Now, some of Rio’s lucrative stake is under threat as the wealthy heirs of those who scoped out the Pilbara 70 years ago fight over the spoils.

Angela Bennett, Australia’s fourth richest woman, claims Rinehart cheated her family company Wright Prospecting out of royalties from the mine.

Wright Prospecting was founded by her father Peter Wright, a school friend of Lang Hancock who would later help him discover vast iron ore riches.

It is seeking a 1.25 per cent stake of the royalties from the Hope Downs mines, from an agreement reached with Hancock in the 1980s. 

Meanwhile, the wealthy family of another former colleague of Hancock, engineer Don Rhodes is also fighting for a 1.25 per cent share, stemming from an agreement that was struck between the two men in 1969.

To further complicate matters, Gina Rinehart’s estranged eldest children John Hancock and Bianca Rinehart are co-defendants in the civil trial, alongside Hancock Prospecting.

They claim their mother stole mining assets from them, meaning the royalties being claimed by Wright Prospecting and DFD Rhodes are rightfully theirs.

Fortune: Hancock is run and controlled by Australia's richest person Gina Rinehart who is worth an estimated £17.8bn

Fortune: Hancock is run and controlled by Australia’s richest person Gina Rinehart who is worth an estimated £17.8bn

Bianca and John, already worth more than £1billion apiece from their stake in the family empire, claim that assets including Hope Downs were meant to be left to them by their grandfather Lang in a family trust.

When he died in 1992, they allege that their mother secretly shifted the assets into Hancock Prospecting, which she then took over.

Gina Rinehart’s lawyers argue that she was merely righting the wrongs of her father.

They claim that he had confessed on his deathbed

They claimed that he had unlawfully moved assets out of the family company behind her back to help fund his extravagant lifestyle with his new Filipina wife and former maid Rose Porteous, including jewellery and a private jet.

John Hancock

Bianca Rinehart

Rift: Rinehart, who is worth an estimated £17.8bn, is estranged from children Bianca Rinehart and John Hancock

Rinehart despised her stepmother so much she attempted to get her deported, and later accused her of effectively nagging her father to death at the age of 82. 

A coronial inquiry later cleared Porteous of murder in 2002.

Legal fight: Hancock Prospecting founder Lang Hancock's Filipina wife and former maid Rose Porteous

Legal fight: Hancock Prospecting founder Lang Hancock’s Filipina wife and former maid Rose Porteous

Old letters unearthed during the civil trial showed she had branded Porteous, – 40 years her father’s junior – as an ‘oriental concubine’ and a ‘prostitute’, trying to get her hands on the family fortune. 

These slurs would open up a rift between her and her father, who kicked her off the company board.

Rio Tinto has largely been a bystander in the epic civil trial, which has taken over Western Australia’s largest courtroom since late July and came to a conclusion on Thursday.

A judgement is not expected until next year.

Rio’s senior counsel Grant Donaldson persuaded the judge to close the court to the public on the final day, arguing the matters set to be discussed were commercially confidential.

Earlier in the trial it emerged that the FTSE 100 firm negotiated an agreement in 2005 that shares any liability for any future claims with Hancock Prospecting, but is likely to cap its payout should Hancock and Gina Rinehart lose this case.

Rio has refused to go into details of the deal, but has played down its potential losses. The Hope Downs mines shipped almost 49m tons of iron ore last year.

Rio’s half-share would have generated revenue of more than £2.5billion, based on today’s iron ore price.

Analysis conducted for the Sydney Morning Herald newspaper this year suggested that Rio and Hancock Prospecting could both be on the hook for £620million if Wright Prospecting and DFD Rhodes win the case.

This is based on them being awarded a 1.25 per cent stake since the first production of iron ore from Hope Downs in 2007, plus interest.

Rio has described the idea that it could be liable for this sum as ‘inaccurate’. 

A spokesman for the firm said: ‘This liability only arises if the court ultimately finds that Wright and/or DFD Rhodes are entitled to royalties in the main proceedings.’

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