DAY 5: FMG EXPERT FLOATS MAMMOTH HANCOCK-WRIGHT ROYALTY

An independent expert engaged by Fortescue introduced in Federal Court proceedings yesterday the 2.5 per cent royalty which has underpinned the vast wealth of Hancock/Rinehart and Wright families.

In cross-examination involving two economic experts, Fortescue’s Mr Martin Hall said including mineral rights would lead to a much higher royalty of 2.5 per cent compared with the industry standard of 0.5 per cent.

Mr Hall said that the Yindjibarndi people’s rights exclude rights to minerals, but if these were included the compensation “would be a great deal higher”.

Asked by Justice Burley if he meant “more in the nature of a percentage royalty”, Mr Hall said.

“Yes there are examples of people selling their rights, [the] Hancock and Wright royalties as the most famous examples. Yes very different,” Mr Hall said.

The Hancock share of the agreement has spawned the empire of Gina Rinehart, Lang Hancock’s daughter, who is Australia’s richest person.

Fortescue in fact never agreed to pay a royalty to Yindjibarndi as its fixed price proposal of around $4 million a year, not even indexed for inflation, was about 1/5 of a 0.5 per cent royalty. In the negotiations in around 2008, Yindjibarndi CEO Michael Woodley asked for a 2.5 per cent royalty, citing the case of Ms Rinehart.

The compensation case before Justice Stephen Burley is centred on Fortescue’s refusal to pay anything to the Yindjibarndi people for impacting their land. It has mined iron ore worth more than $50 billion in revenue since 2013.

Yindjibarndi expert Mr Murray Meaton said that he had “never argued that traditional owners hold mineral rights”, but he emphasised that there was the “value of the benefit of these minerals that form the mineral value”.

He said Mr Hall’s reference to the Hancock-Wright agreement was a payment for introducing Hamersley Iron Ore and Kaiser Steel to the Pilbara. “They did not own mineral rights,” he said, adding that it could be viewed as an “introductory payment”.

Mr Meaton also cited the case of Professor Weeks who was paid 2.5 per cent for introducing developers to the Bass Strait gas fields.

The case continues today.