Kerry Stokes… the Gina factor

It must have been frustrating initially for Kerry Stokes: He'd spent a lifetime outwitting all and sundry in media when suddenly he was surrounded in Perth by iron ore billionaires. Now as the iron ore boom reaches a climax he's got a seat at the table but he's also got a problem.

It was always a puzzle why Rio's 'Mr Iron Ore' – the highly regarded Sam Walsh – had been on the board at the Stokes-controlled West Australian Newspapers (now called Seven West Media).

Now we know why. Walsh has spent two decades working in iron ore: Understanding that business is essential to understanding WA. But Stokes is also beginning to take a serious interest in iron ore, mostly through a little known ASX listed company called Iron Ore Holdings. Oh yes... and one other thing, Sam Walsh through Rio Tinto's $16 billion joint venture in the Hope Downs iron ore project is in business with Gina Rinehart. (Though this could be a problem... I'll explain later).

This loosely affiliated collection of iron ore interests around Stokes is becoming very active. Stokes's Iron Holdings is emerging not as a de facto iron ore miner; rather it's been primarily an investor and trader in the business of ‘iron in the ground'. As Tim Treadgold detailed in Eureka Report earlier this week, the iron ore sector is poised to make money for selected investors who understand this trend.

Stokes as always is miles ahead of the pack, with Iron Ore Holdings recently selling tracts of undeveloped iron ore land in WA for a handsome profit. As the wider market frets over the future of the iron ore price in the wake of China's reduced forecasts for GDP growth, the stock price of Iron Ore Holdings is up more than 50 per cent since October. Directors at the company include Stokes' son Ryan, the former premier of Western Australia, Richard Court, and two former Rio Tinto stalwarts, Malcolm Randall and Alwyn Vorster.

More importantly, Stokes is set to make a lot more cash in the future, thanks to a remarkable uptick in valuations for undeveloped iron ore recently achieved by Gina Rinehart in her $1.6 billion ‘Roy Hill' deal with South Korean steelmaker Posco.

All good so far: Gina Rinehart is helping Kerry Stokes to make money through achieving higher valuations for undeveloped ore. Sam Walsh, board member at Rio Tinto and Seven West Media and a key figure in the Rio/Rinehart joint venture at Hope Downs is helping Kerry understand the iron ore business.

But wait, there's a hitch. Gina Rinehart is in the middle of a titanic row with three of her four children over the family's fortune... thought to be the largest in the land. In the course of the row the Stokes owned West Australian newspaper picked up some excellent insider stories on the Rinehart family fight, including what looked like expertly guided estimates on the valuation of Hope Downs, a key asset in assessing the Rinehart/Hancock family fortune.

Now Gina Rinehart wants to know who the hell gave those numbers out. She has launched legal action against The West Australian (Seven West Media) demanding the paper reveal the sources of its information. The matter will surely go to the board in the coming weeks. Stokes – not to mention Walsh – is in a spot. Co-operate with Rinehart and he undermines his own newspaper, fail to co-operate and he upsets WA's iron ore party and he's only just been admitted entry… watch this space.