Billionaire Gina Rinehart’s lawyers have started their defence against claims by two prospectors for billion-dollar stakes in a lucrative iron ore project.

August 7, 2023

A prospector fighting for a slice of the mining riches that helped Gina Rinehart become Australia’s wealthiest person has a fatal flaw in its legal case, a court has been told.

Hancock Prospecting’s lawyer, Noel Hutley SC, says no mining tenements were issued from the reserves DFD Rhodes’ multimillion dollar claim is based on.

“No ore was ever produced by anyone from any of the rights of occupation or before the cancellation of those temporary reserves,” he told a complex legal case over mining reserves and tenements in Western Australia’s northwest on Monday.

“Which we submit is fatal to the Rhodes’ royalty claim.”

Mr Hutley said the Rhodes’ rights of occupancy held over a series of temporary reserves expired in 1969 and 1970.

“The temporary reserves themselves were cancelled in 1989,” he said, as he attacked the legal case put forward in the Supreme Court by the family company of the late prospector Don Rhodes.

DFD Rhodes claims it’s entitled to 1.25 per cent royalty share of the production from Hope Downs, a lucrative iron ore project half owned by Rio Tinto.

It says a deal was struck in the 1960s with mining pioneers Lang Hancock and his business partner Peter Wright, in which the rights to ore-rich reserves in the Pilbara were handed over.

Mr Hutley said the Rhodes’ claim would turn on the construction of a 1969 agreement and its references to those temporary reserves and what the court accepts the definition of a reserve was.

He pointed to clause five in the agreement, which he said stipulated a royalty was only payable if ore was produced from the reserves by the men’s partnership, Hanwright.

“These words limit the scope of the royalty obligation,” he said as he led Justice Jennifer Smith through the history of the reserves.

“The Rhodes parties cannot get over that limitation. Their contractual royalty claim fails.”

Mr Hutley analysed the grammar of the document and said Rhodes’ use of the word reserve in its claim and the definition it ascribed to it was incorrect.

“Any attempt to slice and dice the clause … just produces ungrammatical word salad,” he said.

Rhodes also relied on an improper construction of the phrase “in the area of” to claim royalties from a “huge” reserves area that was about 20,000 square kilometres in size “which is roughly the size of Slovenia or Israel”.

Mr Hutley said Rhodes had granted an exclusive right to Hanwright to mine its leases, claims and reserves for advance royalties of $1 million – the equivalent of $11 million in 2023.

“The Rhodes parties would receive a very large sum in respect of the chance of my client being able to monetise the 26 tenements,” he said.

The high-stakes legal stoush also involves Mr Wright’s heirs, who are fighting through their company, Wright Prospecting, for a series of Hope Downs tenements and royalties.

The massive mining complex near Newman is one of Australia’s largest and most successful iron ore projects, comprising four open-pit mines.

Mrs Rinehart, the executive chair of Hancock Prospecting, secured the development of the mines after signing a deal in 2005 with Rio Tinto – which has a 50 per cent stake in the project – from mining tenements she took charge of after her father, Mr Hancock, died in 1992.

Her two oldest children, John Hancock and Bianca Rinehart, are also represented at the hearing, where about two dozen lawyers are packing the Perth courtroom for the case that is expected to run until November.

The siblings assert they are also entitled to a hefty share in the Pilbara operation, which they say defeats both claims by Wright Prospecting and DFD Rhodes.