Rinehart is the richest woman in the Asia-Pacific. Photo / Getty
Rinehart is the richest woman in the Asia-Pacific. Photo / Getty
Mining billionaire aims to have 16,000 cows producing formula for China’s infants.
Gina Rinehart, the Australian billionaire who built her fortune on iron ore, is planning a A$500 million ($553 million) investment to supply infant formula to a Chinese market forecast to almost double over three years.
Hope Dairies, controlled by Rinehart's closely held Hancock Prospecting, is seeking to acquire about 5000ha of farmland in Queensland, and is aiming to start production in the second half of 2016, according to co-investor and director Dave Garcia.
Other Australian miners, including Fortescue Metals Group's founder, have been expand into food production to tap rising demand from Asia's middle classes.
The move positions Rinehart, the richest woman in Asia, to compete in an infant formula market in China forecast to swell after the world's most populous nation loosened its one-child policy last year.
"There's another 50 million mouths probably coming online," Garcia said.
Hope Dairies, named after Rinehart's mother, is seeking pasture in Queensland's South Burnett region and a processing facility in Mary Valley. The dairy farm, planned to be among Australia's biggest, may produce as much as 30,000 tonnes of formula a year, Garcia said. It will also supply UHT milk.
All the output is intended to be exported to China and the company will have investment partners including a Chinese entity, said Jason Morrison, a spokesman for Rinehart's Hancock Prospecting.
Australia may sign a free-trade deal with China next week. Photo / File
Morrison said Hope Dairies would be 70 per cent owned by Rinehart, but declined to name the Chinese partner before an official announcement scheduled for today.
A free-trade deal with China, expected to boost dairy exports, may be signed next week, Australia's Prime Minister Tony Abbott said this week.
"There is an enormous opportunity for the processors here," said Michael Harvey, a Melbourne analyst at Rabobank International. "Overseas markets for infant formula are growing rapidly and China is the standout because of the size of the population and the birthrate they have."
The market in China for infant formula could grow to $33 billion by 2017 from about $18 billion now, according to Fonterra Co-operative Group, the world's biggest dairy exporter.
Rinehart's planned operation would employ about 400 people and produce about 70 to 75 per cent of its own milk from a herd of about 16,000 Holstein cattle, Garcia said.
In May, China tightened standards on imported formula after concerns over contamination. Fonterra had exports of two products suspended for 15 months from August last year after a botulism scare that was later proved to be a false alarm. In 2008, Chinese-made milk powder contaminated with the chemical melamine killed at least six infants in China.
Rinehart's dairy will seek to use labelling that would enable customers to check the specific animals that produced milk used to create each package of powder, Garcia said.
Demand in China could rise further as the birthrate increases by two million a year because of the easing of the one-child policy, according to the country's National Health and Family Planning Commission.
Urbanisation could also bolster demand for formula, as the World Health Organisation says mothers in towns and cities are less likely to breastfeed than women in rural areas.
Australia's Trade Minister, Andrew Robb, told a dairy conference in September that the country had to seize on a chance to feed Asia's expanding middle class.
"The opportunities are immense and they are once in a lifetime, almost once in a millennium," Robb said. "We have to position ourselves."
Rinehart, Hancock Prospecting's chairman, has long ties to agriculture and spent part of her childhood on the Mulga Downs station in Western Australia.
Her father Lang Hancock's discoveries of iron ore in the state from the 1950s spurred the nation to become the world's biggest exporter of the steelmaking ingredient and helped make his daughter the country's richest person.
In July, she bought a 50 per cent share in two cattle ranches in Western Australia's West Kimberley.
Andrew Forrest, the billionaire founder of iron ore producer Fortescue Metals in May acquired Harvey Beef, Western Australia's only licensed beef exporter to China.
Rio Tinto Group, Rinehart's partner in the Hope Downs iron ore mine, is one of Australia's biggest cattle ranchers.
Milk producers are also expanding exports. Norco Co-operative is to more than double fresh milk sales to China and Bega Cheese has struck a distribution deal to supply UHT milk.
Expansion by domestic infant formula producers in China risks moving the market into oversupply, UBS analysts led by Christine Peng wrote in a June note.
Total consumption in China could peak in 2018, Macquarie Group has forecast.
But exports of whole milk powder, which includes infant formula, from Australia to China almost tripled to 17,592 tonnes in the 12 months to July last year compared to the previous year, according to industry researcher Dairy Australia.
Australia is the world's third-largest whole milk powder exporter, and produces at least 70,000 tonnes of formula a year.
