Where the coal king is investing
By Tim Treadgold
June 5, 2009
PORTFOLIO POINT: He made a fortune selling out of Macarthur Coal; now Ken Talbot is busy buying a range of resource stocks.
It’s not every day we get to see just how a resource magnate is spending his money, but over the past year coal king Ken Talbot has been diversifying a newly made fortune on the Australian market.
Sure, Talbot’s got plenty of money to play with (or even to lose) but his strategy may offer very useful leads to Eureka Report members.
Last year, with impeccable timing, Talbot cashed out of Macarthur Coal, the Queensland-based business he founded in 1996, and PBS Coals, an American coal miner.
Talbot (right) was one of a handful of resource sector entrepreneurs to time his exit well, harvesting a personal fortune of almost $1 billion by selling his Macarthur shares for up to $20 each to Indian and Chinese investors six months before the stock plunged below $3. The latest BRW Rich 200 estimated his fortune at $750 million, although that total would have swelled significantly in recent months with a rebound in the stockmarket.
Much of the money from the Macarthur sale has been ploughed back into emerging mining stocks such as Riversdale, Sundance Resources, Karoon Gas, Marathon Resources and Goldminex Resources and, most recently, Robust Resources, where he paid $2.5 million for a 15% stake as recently as Monday (June 1).
Since disappearing from public view with his Macarthur Coal sale, Talbot must have made some stockbroker very happy: he’s been buying non-stop.
The end result is a 20-stock portfolio held in the name of Talbot Group, a business he owns outright but rarely talks about. This is largely because of ongoing legal problems associated with allegations of about secret commissions brought against him and a former Queensland government minister, Gordon Nuttall, by the Queensland Crime and Misconduct Commission.
Talbot was overseas when Eureka Report tried to contact him this week, but in the annual report of Talbot Group for the year to December 31, 2008, he was able to claim a total positive return on his portfolio of resource stocks of 9.7%, a country mile ahead of the 40% falls posted by the overall resources sector in the same year. So far in 2009 the overall market has risen about 8%, suggesting Talbot would have made much more than that.
“The group’s resource exposure now extends beyond coal to iron ore, uranium, oil and liquefied natural gas through our various investments in numerous listed and unlisted companies,” Talbot wrote in his latest report.
“As a globally focused business, the group now has assets in Australia, Africa, Asia and North and South America.
“In 2009 we propose to further extend our global reach with the establishment of an international office in New Delhi, India, to capitalise on opportunities and to foster partnerships in that region.”
A list of Talbot’s portfolio is a useful guide to where he sees value, but it does not tell whether he is “in the money” with the stocks because there are no entry dates and purchase prices.
In terms of spread, the Talbot portfolio (at the start of the year) had its greatest exposure to coal (41.4%), followed by natural gas (28.14%), iron ore (24.24%), nickel (3.43%), uranium (2.14%), and smaller interests in chromite, molybdenum, copper and zinc.
The geographic spread was 65% overseas and 35% in Australia, and the spread by project development status was 32% early-stage exploration, 31% feasibility studies, 21% advanced exploration, and 16% in production.
Australian listed stocks in Talbot’s portfolio, where he has at least $1 million at stake, are:
Riversdale Mining (RIV), which has coal interests in Mozambique and South Africa, and in which Talbot Group’s 19.8% shareholding ranks it as the major shareholder, ahead of Tata Steel of India. Riversdale has risen from opening trades in January of $2.42 to $7.13, valuing the company at $1.35 billion and Talbot’s stake at $267 million.
Karoon Gas (KAR), an oil and gas explorer with promising prospects off the north-west coast, in which Talbot holds a stake of 15.99%. Karoon started 2009 at $3.67 and is now at $7, valuing the company at $1 billion and Talbot’s stake at $160 million.
Sundance Resources (SDL), which has iron ore interests in Africa. Talbot owns 19.56% of the company, which started 2009 at 8¢ and is now 13.5¢, valuing the company at $283 million and Talbot’s stake at $55 million.
Sphere Investments (SPH), another African iron ore explorer. Talbot owns 3.07% of the stock, which opened 2009 at 36¢ and is now 56¢, valuing the company at $83 million, and Talbot’s stake at $2.6 million.
Goldminex Resources (GMX), a gold explorer in Papua New Guinea in which Talbot owns 17.65%. It started 2009 at 88¢, valuing the company at $33 million and Talbot’s stake at $5.8 million. It is now 74¢, making it one of the few stocks in the portfolio to fall in value this year.
Southern Gold (SAU), a gold explorer with interests in Australia and Cambodia in which Talbot owns 7.08%. It started 2009 at 6¢ and is now 14¢, valuing the company at $17.4 million and Talbot’s stake at $1.2 million.
Along with those significant stakes, Talbot has also acquired a selection of smaller holdings including stakes at Marathon Resources (MTN), a sometimes controversial South Australian uranium explorer in which Talbot has a stake of 16.57; Southern Uranium (SNU), another South Australian-focused uranium explorer in which Talbot holds a stake of 8.84%; Tiger Resources (TGS), exploring for copper in Africa and in which Talbot has a marginal stake of 0.88%; and Queensland Ores (QOL), a tungsten explorer in the process of being acquired by Metallica Minerals.
Outside Australia, Talbot has interests in Canadian and London listed resource stocks, as well as unlisted companies.
In Canada, there is a 25.6% stake in Macarthur Minerals (TSX code: MMS), which is exploring for iron ore in Australia; Laramide Resources (LAM), a uranium explorer in which Talbot has a 1.2% interest; and Southern Hemisphere Mining (SH), a copper and gold explorer with interests in Chile and in which Talbot owns 5.01%.
In London, Talbot owns 1.03% of Zeehan Zinc, and unlisted interests are in five stocks exploring for iron ore, coal, chromite and natural gas.
Talbot’s wide portfolio is one of the most visible and interesting among the mining tycoons but not the sole fortune currently being recycled into the market.
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