IN A week where markets have started to turn feral on ferrous mining companies, and a few groups that provide them with services, about the last thing it needed was Gina Rinehart's voice pleading for tax breaks and the ability to cut wages to insure the industry.
Insider would have far more faith in the accuracy of her assertions and home-spun economic philosophy if the article printed this week in an industry magazine had her accurately naming her home state (and that of Insider's) as Western, rather than "West" Australia.
Frankly, she does an important industry a disservice with chalk and cheese comparisons of Australian and US labour rates (Insider would much rather live in a country that tries to offer its people a more comprehensive social safety net), and citing as her friends only those who are multi-millionaires.
You would have to wonder how her employees feel about being seen only as a means to her ends.
Her rosy and self-serving view of Australia's past somehow neatly avoids its origins as a convict dumping ground, but instead invites more of a US-style pattern of development by pioneering capitalists. That is almost as mythical as her $29 billion of worth.
Insider suspects that Rinehart might be better focusing on tying off the funding for her $9.5 billion Hope Downs Iron Ore Project as quickly as possible, because if iron ore prices continue on their current trend, nailing nervous bankers to commit to the financing will become even more difficult.
At least she is sole shareholder and does not have to serve the short-term objectives of quarterly returns-driven managers of superannuation funds.
Rinehart has been banging on for some time about the excessive costs of labour, tax and bureaucracy in getting mines up and running and even blamed them as the reason that she sold almost 80 per cent of her stake in Queensland coal prospects to India's GVK, rather than a lesser amount.
In reality, the costs of getting things done are rising, not just because labour costs have hit dizzying heights, but because commodity prices have made so many more mining prospects bankable propositions increasing the demand for (and therefore prices of) equipment and services.
Rinehart is simply frustrated that she is not getting the adoration she feels businesspeople like herself deserve, and is not yet able to cut the ribbon to open her own major mine.
Her Hancock Prospecting website reeks of insecurity of someone desperate for recognition as a mining heavyweight, not just a custodian of a family investment portfolio. Insider hopes her skills do lie in mining, because her investing forays into Fairfax Media and Ten Network have so far been duds.
No real choice
INSURANCE companies are always fascinating, if for no other reason than that they seem to make more money from investing the punitive premiums levied on customers, than from actually pricing their product accurately.
Rusted-on customers always seem to be subsidising discount wars on general insurance premiums for cars, houses and the like.
Insider recently switched vehicle insurers after receiving renewal notices pitched at prices that could have bought the cars in question.
The old insurer, having been told by Insider they were dumped after obtaining several online quotes, asked if there was anything that could be done.
Given that every quote was cheaper than the renewal notice including the old insurer's by a margin of more than $200 the answer was obvious: "Yes no matter how sheep-like loyal customers are, they will eventually work out they are being fleeced".
Investment markets are more pragmatic, and Insurance Australia Group has been rocketing up the charts in price and volume terms for the past fortnight from $3.70 to a peak this week of $4.16 a 12 per cent gain.
Most of that was its strong results a week ago, but the shares began turning a week or so beforehand, helped along by analysts' assessments that IAG and other insurers have been able to justify increasing their premium charges after all the recent flood and fire disasters not that they would have had much choice.
Companies that reinsure those risks i.e. bet on their bets have borne the brunt of claims and would be demanding higher prices, so IAG and its competitors can either push back on customers by passing on the extra costs, or cop thinner profit margins. And that is no real choice.
Fond farewell
THIS Insider is going outside, and may be gone for some time. Thanks to all those urgers, purgers, readers, writers, colleagues and friends, who have offered direction, correction, threats, laughter, abuse and letters from their lawyers.
It has been a privilege.
Frequently Asked Questions about this Article…
Who is Gina Rinehart and why is she in the headlines for investors?
Gina Rinehart is the head of Hancock Prospecting and a high‑profile Australian mining entrepreneur. The article highlights her public calls for tax breaks and looser labour rules to support the iron ore and mining industry, her efforts to fund the Hope Downs iron ore project, and past investment moves such as selling most of her Queensland coal stake to India’s GVK and unsuccessful media investments.
What is the Hope Downs iron ore project and what funding risk did the article mention?
Hope Downs is described as a roughly $9.5 billion iron ore project linked to Rinehart. The article warns that if iron ore prices continue to weaken, securing bank financing for a large project like Hope Downs could become more difficult, making funding one of the key risks investors should watch.
How did Gina Rinehart’s comments affect mining company sentiment and share prices?
The article says Rinehart’s public pleas for tax relief and the ability to cut wages arrived when markets were already nervous about ferrous mining firms. Her comments may have intensified debate over the industry’s challenges and added to investor scrutiny of mining stocks, especially as commodity prices and project costs shift.
Why did Rinehart sell almost 80% of her Queensland coal stake to GVK, according to the article?
The article reports Rinehart blamed excessive labour, tax and bureaucracy for selling nearly 80% of her Queensland coal prospects to India’s GVK. It frames the sale as linked to the higher costs and regulatory hurdles of getting mines up and running.
What does the article say about Hancock Prospecting’s public image and Rinehart’s other investments?
The article describes Hancock Prospecting’s website and Rinehart’s public posture as projecting insecurity and a desire for mining recognition. It also notes her investing forays into Fairfax Media and Ten Network were 'duds,' indicating mixed results beyond her core mining activities.
Why did Insurance Australia Group (IAG) shares jump, and what should investors know?
According to the article, IAG shares rose about 12% over a fortnight after strong results and analysts’ views that insurers can justify higher premium charges following recent floods and fires. The piece stresses that insurers faced higher reinsurance costs, so pushing those costs onto customers or accepting thinner margins was largely unavoidable.
How do reinsurers and natural disaster claims affect general insurance companies?
The article explains that reinsurers—companies that insure insurers—have borne much of the burden of catastrophic claims and are demanding higher prices. That raises insurers’ costs; insurers like IAG must either pass those costs to customers via higher premiums or accept lower profit margins, both of which can influence insurer earnings and share performance.
Should everyday investors switch car or home insurers based on the article’s points about premiums?
The article suggests everyday consumers can benefit from shopping around: the author switched vehicle insurers after renewal quotes were much cheaper elsewhere. It highlights that loyalty can be costly because insurers sometimes raise renewal prices, so comparing online quotes may save money. (This reflects the article’s anecdote rather than personalised financial advice.)
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