Australian mining magnate Rinehart battles kids in court

SYDNEY Tue Sep 11, 2012 7:02pm BST

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SYDNEY (Reuters) - Gina Rinehart heads to an Australian court on Wednesday to do battle with her children over a multi-billion-dollar family trust, an unwelcome distraction for Asia's richest woman as she scrambles to secure funding for a $10 billion (6.2 billion pounds) iron ore mine.

The case will also bring more unwanted public scrutiny to the iron ore heiress who has become more vocal on policy matters but prefers keeps her personal life under wraps and fought unsuccessfully to have the family dispute heard behind closed doors.

Some details of the case, which begins in the New South Wales Supreme Court on Wednesday, are likely to be suppressed. A ruling is not expected for some time.

The dispute has already caused a delay at Rinehart's flagship Roy Hill iron ore mine, rail and port project in Western Australia, which is now running into some stiff headwinds from slowing China demand and soaring costs.

A halving in iron ore prices .IO62-CNI=SI over the past year has dented both investor appetite for such projects and the 58-year-old widow's fortune, estimated by Forbes in February at around $18 billion.

Rinehart has been putting some of her vast wealth to work with purchases of media companies Fairfax Media (FXJ.AX) and Ten Network Holdings (TEN.AX) in the past year, causing some consternation among the chattering classes.

Her opposition to taxes and calls for miners to be allowed exemptions from laws restricting the use of foreign labour have also put her on a collision course with government and unions.

Recently, Rinehart warned Australia was becoming too expensive for mining firms which she said could hire workers for under $2 a day in Africa.

FAMILY TIES

Rinehart, known as the Pilbara Princess, has a long history of controversy and has played out much of her life in the media spotlight.

She is the only child of legendary Australian mining pioneer Lang Hancock, a larger-than-life character credited with discovering the world's largest deposit of iron ore in Pilbara, Western Australia.

Rinehart learned the business at her father's knee and, after a prolonged battle with his third wife following Hancock's death in 1992, cemented control of his company, Hancock Prospecting Pty Ltd.

Rinehart owns three-quarters of Hancock Prospecting and is the sole trustee of the family trust which holds a further 24 percent of Hancock Prospecting for the benefit of her four children.

Last year, just days before the trust was due to vest, Rinehart changed the vesting date to 2068, prompting her three eldest children -- Hope Rinehart Welker, Bianca Rinehart and John Hancock -- to fight to have her removed as trustee.

The youngest, London-based Ginia Rinehart, has sided with her mother in the dispute.

E-mails made public as part of the fight to keep the case private showed Rinehart told the children the vesting of the trust would likely trigger crippling capital gains tax liabilities for them. She also described the elder trio of children as being lazy and spoilt, and warned that their security would be at risk if they persisted with the action.

Robert Richards, a specialist in tax and trust law for high net worth individuals, said the plaintiffs would need to show that Rinehart did not act in the interests of the trust and was not impartial.

"You don't go and use the trust documents to penalise people and you certainly don't use it to benefit yourself," he said.

The early skirmishes in the family feud delayed the sale of equity stakes in Roy Hill, Rinehart has previously said.

South Korean steel giant POSCO (005490.KS), Japanese trading company Marubeni (8002.T), South Korea's STX Corp (011810.KS), and Taiwan's China Steel Corp (2002.TW) hold a collective 30 percent stake in the project, with Hancock Prospecting holding the remainder.

It is not clear what impact, if any, the removal of Rinehart as trustee of the family trust would have on Hancock Prospecting and its iron ore, coal and media empire. Shares in the company can only be held by Rinehart and her direct descendants and cannot be pledged as collateral.

(Reporting by Lincoln Feast; Editing by Raju Gopalakrishnan)

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