China’s $2.4 Billion Gift To Aussie Miners Andrew and Nicola Forrest

China’s controversial $167 billion mega-dam project in the Himalayas might be upsetting neighboring countries, but it has boosted the fortune of iron ore billionaires Andrew and Nicola Forrest by $2.4 billion in just four weeks.

The separated pair of Australian iron ore miners are joint owners of a 36.7% stake in Fortescue, one of the world’s biggest producers of the steel making material.

Since news of decision to build the world’s biggest hydroelectric dam on the Yarlung Tsangpo river in Tibet started to leak last month the price of reinforcing (rebar) steel, used extensively in dam construction, has been rising, taking the iron ore price with it.

The knock-on effect of a $10 per ton increase in the most commonly traded form of iron ore to $100/t has been a 23% increase in Fortescue’s share price on the Australian stock market over the past month to $11.57 (A$17.81) with 8% of that rise coming in the last week.

The higher iron ore price has lifted the value of the Forrest’s jointly owned 1.13 billion Fortescue shares to $13 billion, up $2.4 billion since late June.

Other iron ore miners have shared in the revival of the iron ore price which had been falling from early last year when it was trading at $143/t, dropping to a recent low of $93/t before the rebound to $100/t.

Start Of Economic Stimulus

The decision to proceed with construction of Yarlung Tsangpo project is seen as a sign that the Chinese Government is starting a new phase of economic stimulus through grand project building, as it has frequently in the past, to stimulate economic growth.

Investor interest in the project, which consists of five cascade dams around the city of Nyingchi in eastern Tibet, has triggered widespread buying of commodities and mining stocks.

Glynn Lawcock, head of resources at the Australian investment bank Barrenjoey, told the Australian Financial Review newspaper that “commencement of the hydropower project was seized by Chinese markets as proof of economic stimulus.”

Daniel Hynes from ANZ Bank said the project “promises to deliver a positive economic boost for construction materials such as concrete and steel.”

When finished, the hydroelectric project could supply up to 70 gigawatts of power, three times more than China’s biggest hydro project, the Three Gorges Dam, and more than the entire electricity capacity of countries such as Poland.

But the damming of rivers can be a problem for downstream communities which rely on river flows for fresh water.

India and Bangladesh are concerned about a future lack of water which could affect the livelihood of millions of people.

The Yarlung Tsangpo project is also splitting the opinion of environmentalists who see the “green” hydroelectricity to be produced as a welcome way of displacing fossil fuels such as coal and oil but are concerned about damage to damaging biodiverse region which is also known to be seismically active.