Flinders shareholders question political involvement in $6b iron ore project – Part 2

May 7, 2023
0 Comments

WA Premiers, State and Federal ministers and senior government advisers have played a significant role in accommodating NZ and China plans to build a new iron ore mine and port at Balla Balla between Karratha and Port Hedland.
A Flinders minority shareholder told StreetWise from 2013 to 2014, there were high level meetings between Rutila and Todd Corporation representatives and the WA Government. They included meetings with Todd CEO Jon Young and then Premier Colin Barnett, Mines Minister Bill Marmion, Attorney-General Cheryl Edwardes and Chief of Staff to the Premier Colin Edwardes. Flinders had no representatives at these meetings.
The shareholder said political involvement continued in 2018 when there were WA Ministers and Federal Senators communicating and claiming in parliament that the Flinders deposit was part of the BBI Group project when its board had repeatedly informed the ASX it had no formal commercial agreements with BBIG or Todd. The WA Premier’s office has refused to comment.
“A WA Minister (Alannah MacTiernan) even went to the 2018 Shanghai Expo with the BBI Group for meetings with Chinese officials where they discussed the BBI Group port, rail and mine plans,” he said.
According to, ‘Report on Ministerial Visit to Shanghai, China, 3-7 November 2018’, key discussion points included a general update on the project, “indicating encouraging progress”; key Chinese partners are now, “well advanced for additional capital, construction and off-take”; and that facilitation by the WA Government, “has been effective, and is appreciated by BBI Group”.
On November 8, 2018, Ms MacTiernan told Parliament: “Premier McGowan was made aware of the initiative of President Xi when he was last in China and committed WA to actively engaging to help strengthen the WA-China relationship.”
Her discussions with industry groups included, “BBI Group and Fortescue Metals Group on their mining and port plans in regional WA”.
The same month, South Australian Senator Simon Birmingham welcomed the WA-China venture and stated BBIG had signed a ‘financing agreement’ with the Zhongchong Investment Group and ‘iron ore supply and transport agreements’ with Shanghai Sheng Xuan Group.
The next month in December, Flinders attempted to delist from the ASX, its reason, “There are presently no viable infrastructure solutions for the PIOP”.
The board believed, “Flinders will have greater access to funding in an unlisted environment from groups including private equity and Asian and Middle Eastern investors”but the Australian Takeovers Panel made a ‘declaration of unacceptable circumstances’ and ‘coercion’, so Flinders withdrew its delisting attempt.
The proposed Flinders delist was announced while Flinders continued to state to the ASX they had “no commercial agreements” with BBIG.
Three years later, Ms MacTiernan informed parliament on August 5, 2021, though Flinders appeared to be making no progress with development, “the company has sought further time to progress its financing and marketing arrangements and … its plans were complicated by the COVID-19 pandemic, in particular the company’s restricted ability to visit China to tie down some of those financing options. The company has advised that liaison continues with BBI Group’s proposed Chinese-based equity syndicate”.
Leader of the Opposition in the Legislative Council Steve Thomas asked Ms MacTiernan during the second reading of the Railway (BBI Rail Pty Ltd) Agreement Amendment Bill 2021, “why it is being held up”?
Ms MacTiernan repeated what she said in the second reading and stated: “The company has advised that liaison continues with the BBI Group’s proposed Chinese-based equity syndicate.”
The shareholder told StreetWise the fact BBIG intended to delay the rail project by 18 months was not disclosed to shareholders or the market and was clearly relevant to Flinders’ decision to enter into a 2020 agreement with BBIG. He said shareholders want ASIC to investigate whether Flinders directors knew of the proposed 18 month delay and should have reported it to the market.
During a third reading of the Bill on August 12, Dr Thomas asked for clarification of the structure of the controlling entity.
The Minister replied: “The owner behind BBI Rail is Balla Balla Infrastructure Group, which is a company that is incorporated in Australia. TIO (NZ) Limited … owns 93.55 per cent of the Balla Balla Infrastructure Group, which in turn is the full proprietor of BBI Rail Aus Pty Ltd. The remaining 6.45 per cent of the shares are owned by Nicholas and Angela Curtis, who are Australian citizens. TIO (NZ) Limited is a private NZ company of long standing and is wholly controlled by the Todd family.”
Ms MacTiernan assured the house, “it has financial capability and is ready. The financing negotiations involve overseas parties, particularly China-based. The work started in 2020, but it became obvious that we would need this extension of time.”
Ms MacTiernan added: “It is a bit of a strange beast. We are actually allowing a company the right to build that rail line even though it is not the entity or has not got a binding contract to provide the ore. I understand at that time (2017) there was some conflict around whether that really was the way a state agreement should go. It is an unusual situation. Of course, members will be aware that a lot of argy-bargy has gone on, much of it played out in the press between the various entities that hold the tenement (Flinders) and those that hold the right to build the rail. An issue that has played out in the press is whether there has been oppression of minority shareholders in this process. We understand that negotiations are still on foot, and I am advised that in December 2020, Flinders and BBI Group commenced discussions about a potential transition that could result in Flinders retaining 100 per cent of the Pilbara iron ore project as well as 100 per cent of BBIG’s port and rail infrastructure assets. These discussions are ongoing and have not yet been finalised.”
That ‘transition’ failed, the shareholder told StreetWise.
Dr Thomas: “This is a very complicated tangled web. Try as I might to blame the government and the minister for where the corporate structure of this project finds itself, I do not think I would be able to do so and do not plan to waste a lot of time trying.”
Ms MacTiernan: “ … you have got the ultimate majority holder of the interest in Flinders, so Todd, basically holding about 56 per cent of the ore tenements, which is PIOP, and about 93 per cent of the rail project.”
Having met the previous year company executive Michael Todd, the Minister told parliament, “early on in the process I met with some of the investors, people looking for assurance that our government was supporting this project. Fundamentally, this is the job of these people. They have to go out there and raise money”.
Dr Thomas then referred to Flinders’ statement to the ASX in which it expected, “a shortfall for project expenditure for the first year ending 2 September 2021 under the terms of its agreement that required BBIG to procure a minimum annual spend on the feasibility study of $15 million. Has anyone in government looked at this and decided, in effect, because the project is not proceeding beyond where it has got to with approvals, that it would make sense not to spend $15 million on further approvals but to wait for that financial tick off?”
Ms MacTiernan: “It is not our role to micromanage these projects. We do not have dozens of other people queueing up to build a railway into the Dampier port. Our only role is to consider opportunity cost. It is up to the proponents to do all the work involved that is necessary to get them into the position to get the finance. These sorts of arrangements are complex and they do not always lend themselves profitably to Zoom negotiations, so we have given them this extension. We are not micromanaging how they operate their business. There are Australian Securities Exchange requirements around disclosure and statements need to be made to the ASX to ensure that all people in the know are not undertaking improper trading or taking unduly advantageous market positions. It is not our business. We are leaving this company to do that. We have negotiated an extension of time for the proponents to bring this whole thing together. If they cannot do it, they cannot do it. Whether we decide it is worth extending this again or whether this horse is not going to race will be a decision that is made at that time. Nothing in that announcement or any of these other issues that have arisen tells us we are dealing with entities that are not of commercial merit.”
Ms MacTiernan said Todd’s directors were mindful of the concerns of the minority shareholders: “But if one is a minority shareholder in Flinders, what is going to be the best option to get that ore out? There is not anyone else out there, and there is no-one with a zeppelin ready to take it into Dampier.”
Dr Thomas: “I would not recommend a zeppelin!”
He added: “I have some sympathy for the smaller shareholders in that they hold a share of an asset that the world has wanted for some time.”

Alternative sites

DEPUCH is an A-Class reserve. Half of the rock art-rich island regarded as Uluru’s ‘dark sister’ falls inside BBIG’s proposed ‘development envelope’.
As reported by StreetWise, the island is a repository of some of the best rock art in the world that prompted the Government in the early 1960s to abandon plans to build the Pilbara’s first iron ore port at Depuch and move it to Burrup Peninsula, Murujuga.
BBIG says the project will not impact on any Indigenous heritage sites or areas of cultural significance as agreed to under land use agreements with Ngarluma Aboriginal Corporation.
It adds no World Heritage-listed sites occur near the project though Murujuga, less than 100km away, is nominated for World Heritage status to be announced in 2024 or 2025.
BBIG initially considered a number of alternative sites and options for the export of iron ore, including the use of existing port facilities in Port Hedland and Anketell near Karratha.
It states an investigation by Marine Logistics Australia in 2012 identified the most economically viable solution was to construct a small barge loading facility near West Moore and Depuch islands.
BBIG also states, “All native title and heritage agreements for the BBI Project and Balla Balla mine are in place with the relevant traditional owner groups”, including Ngarluma; Yindjibarndi Aboriginal Corporation for the Yindjibarndi people; and Wintawari Aboriginal Corporation for the Eastern Guruma people.
There is no native title on Depuch Island. Visitors need a permit and permission to visit the protected reserve 3km off Balla Balla.
Such a strategic mining and construction project could have a major impact on the island no less severe or significant than the threat posed in the early 1960s when the WA Government proposed to build the state’s first iron ore port at Depuch.
The plans were abandoned after Australian and overseas scientists including the WA Museum raised concerns over the destruction of rock art by the industrialisation of the remote coast.
In 1964, the WA Museum wrote to the Government stating the petroglyphs, “have been hailed as the most important collection of Aboriginal engravings in Australia”, and warned the art was, “not so much endangered by the building of the proposed harbour works as they will be by the visitors who will gain easy access to the island through them. Because of the nature of the rock of the island, an individual can destroy in five minutes of thoughtlessness, or by deliberate vandalism, the enjoyment of others for many hundreds of years”.
Environment Minister Stephen Dawson told StreetWise in 2021: “I am advised it (Balla Balla project) has the full support of the traditional owners who hold native title over the project land. Depuch Island is not within the proposed development area.”
This is incorrect as BBI’s ‘development envelope’ shows (opposite).
Most of the ancient petroglyphs are concentrated at Anchor Hill, its towering rock cairn overlooking Beagle Beach, Watering Valley and Skipjack Cliffs.
The Hunter’s Pool and Jane’s Greek rock art galleries on the west side and northern tip of Depuch fall inside the BBIG project area.
Education and Native Welfare Minister Edgar Lewis stated on December 23, 1964: “We have an accurate statement of the island in its context as one of the most remarkable native art sites in existence and of which we, as Western Australians, can be justly proud.”
The McGowan Government must have missed the historical memo and dismissed the importance of the State’s indigenous heritage, not to mention investments by 4000 Flinders mums and dads, for royalties of 7.5% a tonne.
A small price to pay.

‘String of Pearls’

FLINDERS minority shareholders say the Balla Balla project fits into China’s plan to establish a global network of strategic ports referred to as its ‘String of Pearls’.
Part of China’s ‘Belt & Road’ Initiative, the phrase was first used in a 2005 US Defense report to describe a strategy of building, buying or operating ports (including artificial islands) in the Middle East, Indian Ocean and Asia-Pacific.
Since its launch in 2013, BRI has become, “the cornerstone of foreign policy for the People’s Republic of China under Xi Jinping’s leadership to project China’s new-found economic influence through networks of infrastructure, trade, and investment deals”.
As of March 2020, BRI partners include 38 in sub-Saharan Africa, 34 in Europe and Central Asia (including 18 EU member states), 25 in East Asia and the Pacific, 17 in the Middle East and North Africa, 18 in Latin America, the Caribbean and Southeast Asia. BRI partners also include, “notably, Australia, Greece, Italy, South Korea, Poland, Saudi Arabia, United Arab Emirates and enemies (notably, Iran) of the USA”.
In June 2019, Mr McGowan said WA would not sign up to BRI.
In a 2019 article published by The National Bureau of Asian Research in Washington DC, ‘China’s Evolving Military Engagement Along the Silk Roads’, security expert Nadege Rolland states Chinese strategic planners generally agree the, ‘boundaries of China’s national security’, are defined by the expansion of its overseas interests and that, ‘where national interests expand, the support of the military force has to follow’.
She said since its introduction, BRI pushed, “the boundaries of China’s national interests well beyond the traditional focus on the country’s immediate neighbourhood. China’s Ministry of National Defense publicly denies that BRI has any military or geostrategic intent. Even if that is truly the case, the priority Beijing has given to BRI for the last six years has created an overall acceleration and geographic expansion of Chinese overseas activities that will inevitably generate the need for some level of state and military protection”.
Will China use its BRI investments, ports, airports, railways and satellite networks to support military expansion? Will the string of pearls of Chinese-owned or operated ports, particularly those along the Indian Ocean, be weaponised to support and protect China’s interests along its new ‘silk road’?
Vantage Point Asia policy analyst Kristen Gunness says China for more than a decade has been developing expeditionary military capabilities driven by its expanding global footprint.
“Potential contingencies along the Belt and Road routes include border skirmishes, maritime incidents, regional or host country unrest, and attacks on infrastructure,” she warns.
Japan’s 2019 Defense white paper highlighted concerns over the use of BRI infrastructure projects to accommodate the expansion of the PLA into the Indian and Pacific Oceans, Africa and Europe.
The Flinders minority shareholder said nothing has been released in Australia stating Flinders’ deposit was part of BRI. Only statements by Flinders’ board that it had no agreements with BBIG, which is linked to BRI. The shareholder said the BRI link is reflected in the involvement of Meng Wang, deputy investment director at the Zhongchong Investment Group providing financing for the BBI project. He said the funding for the BBI project appears guaranteed yet the Flinders board continues to allude to funding difficulties.
Beijing denies any connection between BRI and its defence goals. President Xi has repeatedly insisted BRI is solely about economic cooperation and development. In 2019, China’s defense minister referred to the BRI in an address in which he said the Chinese military would pursue friendly cooperation with foreign militaries, “in the framework of the BRI”.
Federal Minister for Trade, Tourism and Investment Simon Birmingham said commercial agreements signed in Shanghai demonstrated both the current strengths and future potential of the trade and investment relationship between Australia and China.
The agreements included BBIG signing a financing agreement with China Zhongchong Investment Group and an iron ore supply and delivery agreement with Sheng Xuan International.
“They are also a testament to the ongoing strength, diversification and growth of our trade and investment partnership, which is underpinned by the China-Australia Free Trade Agreement,” he said.
The China Economic Times reported: “In the past, the cooperation of Chinese enterprises in Australia was mainly based on resources. Now, China and Australia continue to expand operations in various fields. Experts believe that with the implementation of the China-Australia Free Trade Agreement, the advancement of the ‘Belt and Road’ initiative, and the optimisation of the cooperation environment between China and Australia, the multi-field cooperation between China and Australia will become closer in the future.”