China-Australia axis turns on mining, to the benefit of both

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: Andrew “Twiggy” Forrest is not the most likely candidate to become the poster boy for Australia’s mining boom. His last big venture ended in disaster for many investors.

US bondholders who bet $400 million on an Australian nickel mining company he founded in the 1990s, Anaconda Nickel Ltd, recouped only 26 cents on the dollar. Anglo American Plc, the world’s second-biggest mining company, fared even worse. It walked away with just 7% of its $200 million investment in Forrest’s company. Today, Forrest, 46, has once again charmed investors, in Australia and beyond, this time with the promise that he’ll become one of the largest suppliers of iron ore to China.

Leucadia National Corp, a New York-based holding company with interests ranging from wine to real estate, invested $400 million for a 9.92% stake in his publicly traded Fortescue Metals Group Ltd. Russian steel billionaire Victor Rashnikov owns a 5.3% slice and plans to raise it above 15%. Birmingham, Alabama-based Harbert Management Corp already owns 15.6%. Fortescue shares were the best performers in Australia’s benchmark index in 2007, rising almost six-fold. Recently, the company enacted a 10-for-1 share split. Forrest’s 36% stake in the company was worth 7.8 billion Australian dollars ($6.9 billion) on January 4 when the stock opened at (Aus) $7.70. So far, Fortescue has not produced a single ounce of iron ore. “There’s a feeding frenzy going on over Australian resources,” says David Parker, 42, director of the Chamber of Minerals and Energy in the state of western Australia. The country’s economy has been soaring along with the global commodities boom. Emerging giants, led by China, are battling one another for a share of Australia’s natural resources to fuel their continuing economic expansion.

Australia is the world’s numero uno exporter of iron ore, coal and alumina, which is derived from bauxite. It ranks second in zinc and lead; third in gold, nickel and manganese; fourth in copper; and fifth in liquefied natural gas (LNG), according to the Australian Bureau of Agricultural and Resource Economics, a government agency. It also has the world’s biggest known uranium reserves and is the number one producer of diamonds by volume.