Oz billionaire takes on big guns with IPO

Billionaire Clive Palmer, a law school dropout who made his first fortune from real estate on Australia's Gold Coast, is driving what may be the biggest initial share sale of a mining company since 2007.

Palmer, 55, aims to raise as much as US$3 billion ($4.3 billion) in the Hong Kong IPO of Resourcehouse, which plans to spend A$10.2 billion ($12.9 billion) to develop iron ore and coal mines in Australia to supply steel mills and power companies in China, challenging producers such as BHP Billiton.

"Most of our funding comes from the People's Republic of China," said Palmer, referring to Resourcehouse, which this week sealed an investment and sales accord with Metallurgical Corp of China. "It's the place where we should be."

Palmer is betting demand for Resourcehouse stock will surmount waning investor appetite in Hong Kong for IPOs and be underpinned by economic growth in China. The nation is expected to consume more iron ore over the next five years than Australia, the biggest exporter, has shipped throughout its history, according to Rio Tinto Group.

"He's playing in the game he knows well and that's the steel industry," said Mark Pervan, a commodity strategist at Australia & New Zealand Banking Group.

"They've obviously taken a calculated decision on iron ore demand."

Palmer, who owns closely held Mineralogy, is Australia's fifth-richest man, according to Business Review Weekly's annual rich 200 list published in May, which valued his fortune at A$3.4 billion. Last year he paid A$5.3 million for a Horizon 98 motor yacht, adding to his 14.6 meter Sunseeker luxury boat, two McDonnell Douglas MD-82 private jets, and an Agusta helicopter.

"I'm pretty comfortable and quite happy in my lifestyle," Palmer, who attended the University of Queensland and was a law student at the Queensland Bar Board, said in Brisbane, Australia.

"You can only live with one woman, sleep in one bed, have one meal at one time."

A licensed real estate agent and owner of the Gold Coast United soccer team, Palmer retired at 29 after he'd amassed a fortune of about A$40 million through real estate investment on the Gold Coast.

He came out of retirement two years later to buy the Australian assets of US-based Hanna Mining.

Palmer negotiated his first major iron ore deal with China's Citic Pacific in 2006. Citic signed sales agreements in November for the US$4 billion mine it's building that will draw on the same lode in northwestern Australia as the Resourcehouse project.

"He seems to have a pretty solid theme to what he's doing to supply raw materials to China, which I think is probably going to be a winner," said Peter Arden, a Melbourne-based senior mining analyst at Ord Minnett, an affiliate of JPMorgan Chase & Co.

Resourcehouse has the potential to become the world's fourth-largest iron ore producer, according to Macquarie Group, one of the IPO managers.

Vale Rio Tinto Group and BHP control about two-thirds of the world's seaborne trade, prompting China to invest in smaller rivals in Australia in a bid to break their dominance.

Palmer, who says he's been to China more than 50 times, has long-term personal contact with the nation stretching back to 1962 when as a boy he met Pu Yi, the last Emperor of China, in Beijing while on a visit with his businessman father.

His IPO, sold at the top of its US$2 billion to US$3 billion range, may be the biggest in the industry since Eurasian Natural Resources's US$3 billion share sale in 2007, according to Bloomberg data. The sale has been delayed to March, the Australian newspaper reported last month.

Resourcehouse plans to produce 40 million tonnes of coal a year from six mining pits for more than 20 years.

"That really means that whether the market is up or the market is down you are still in business," Palmer said. "It's not like you are manufacturing lipsticks in Kowloon and you've got the wrong colour for the wrong year."

Clive Palmer
* Chairman of Resourcehouse.
* Aged 55.
* Australia's fifth richest man with A$3.4 billion.
* Amassed first fortune through real estate investment on the Gold Coast.

- BLOOMBERG