When you are putting together a rich list, the hardest entrepreneurs to value are property billionaires and mining moguls.
Both sectors are famous for using slightly sketchy valuations to describe their projects that make it difficult to see how much a particularly deal is actually worth to the entrepreneur themselves, after all the debt is taken into account, the up-front costs are taken out and the profit is calculated.
How much is a $600 million apartment project really worth to a property magnate?
How much value can you actually ascribe to a mining magnate from a $3 billion mine project? Particularly when that mine doesn’t actually start producing anything for another four years?
That question was raised again this week by Australia’s richest woman, Gina Rinehart, who opened a $100 million test pit at her $7.5 billion Queensland coal project, Alpha.
The pit is the first major step towards getting the green light for Alpha, and an adjoining $7.5 billion project called Kevin’s Corner.
At least we know what the $15 billion price tags on the projects refers to – that’s the amount needed to get the two mines up and running, including dedicated port and railway infrastructure.
Rinehart has confirmed she will be looking to sell parts of the projects – mainly to customers – to raise the finance to get the projects off the ground.
“There will be an announcement in a short time about another form of funding that we are doing,” Rinehart told the Australian Financial Review.
“The whole idea is to get equity participants into the project.”
Exactly how much of the project Rinehart’s company Hancock Prospecting ends up retaining remains to be seen, so exactly how much these projects will swell her $4.75 billion fortune is difficult to say.
But it does seem a matter of when, not if, Gina Rinehart, becomes Australia’s richest person.
Together, the two coal mines in Queensland would be the biggest in Australia. And remember, this is on top of Rinehart’s extensive iron ore holdings in the Pilbara in Western Australia, some of which are in production through a joint venture with Rio Tinto, and some of which Hancock Prospecting is looking to develop on its own.
If the Alpha and Kevin’s Corner projects start producing in 2014 as planned, there is a good chance Rinehart will take over as Australia’s richest person by then, if not well before.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
