Mining tycoon Gina Rinehart invests AU$500m in infant formula venture

14-Nov-2014 - Last updated on 17-Nov-2014 at 08:21 GMT

Australia's richest person Gina Rinehart has committed AU$500m (US$433m) to a project to produce infant formula Down Under for the lucrative Chinese market.

Rinehart, who made much of her estimated AU$19.9bn (US$17.7bn) fortune mining iron ore, will invest around half a billion Australian dollars in Queensland-based Hope Dairies through her firm, Hancock Prospecting.

Rinehart holds a majority stake, reportedly 70%, in Hope Dairies, which was only registered with the Australian Securities and Investments Commission (ASIC) in July 2014.

The remaining interest is owned by several investors, including Chinese state-owned firm, CMAC Engineering.

Hope Dairies is reportedly seeking to acquire 12,400 acres of farmland in Queensland, on which it plans to build a plant to produce 30,000 tonnes of "pharmaceutical grade" infant formula per year.

DairyReporter.com understands Hope Dairies will sign a memorandum of understanding (MOU) with the Queensland government regarding the purchase tomorrow.

Jason Morrison, spokesman, Hope Dairies, told DairyReporter.com the business is at the moment "being pulled together."

As well as acquiring land, Hope Dairies is "bringing together a large number of Australian dairy experts," he said.

"Their expertise will be combined with Mrs Rineharts's export expertise to produce a premium product for the Chinese market."

It expects to begin shipping Hope Dairies brand infant formula from Australia to China in late 2016.

"Room for everyone"

Chinese retail sales of infant formula increased to US$14.6bn in 2013, according to Euromonitor.

It expects this figure to increase to around US$25bn by 2017.

Under revised Chinese legislation, introduced May 1 2014, only infant formula products manufactured by firms that feature on the Certification and Accreditation Administration (CNCA) List of Registered Dairy Manufacturers are permitted to enter to China.

Five Australian firms, including Murray Goulburn, currently reside on the list.

Despite the "pharmaceutical grade" of its infant formula, Hope Dairies does not intend to push out its domestic counterparts.

"It's such an enormous market that there is enough room for everyone," said Morrison.

"We don't see this as a fight for market share. All we see is a market where there is a great deal of demand.

Through her investment, Rinehart merely wants to ensure "Australia stays in the game," he said.

"She's doesn't consider herself an investor. She's proud to be Australian and wants to help the state of Queensland."

"At the moment it doesn't actually have processing facilities. So this will be the first time in about a decade and a half that milk will be processed in Queensland."

“This will be the thing that puts Queensland back in the game," Morrison added.