OK. But have a look at the Anaconda Nickel fiasco also. Twiggy made a lot of bogus promises and made some stupid decisions which ultimately turned the company to crap. Seems to me he didnt learn his lesson. The following 2 articles from 2001 & 2002 sheds some light into Forrest's past. This whole FMG mess wasnt too long after.
(1) "If it is successfully completes negotiations with its US bond holders for a cash buyout at 25c in the dollar, troubled nickel laterite producer, Anaconda Nickel, promises a complete break with the past. This will include changing its name, moving to new premises in Perth and replacing the Andrew Forrest-designed company logo.
In a no punches pulled speech today to the Sydney Mining Club, new CEO, Peter Johnston (ex WMC nickel), who took over last December as part of a new management team, ridiculed the past “promises that came thick and fast.”
Instead he asked his audience to look forward to the potential for the Murrin Murrin nickel and cobalt plant in the Eastern Goldfields of Western Australia.
Murrin Murrin - which he described as a giant hydrometallurgy plant - went from laboratory trials to world scale construction without a pilot plant in between. The result was a major series of technical problems that disrupted production, put Anaconda on the brink of receivership and precipitated the change in management.
There were commissioning delays, cost overruns, slow ramp up of production, and a series of “catastrophic” plant failures in each autoclave train of the Murrin Murrin plant.
Today, after spending $30m over two years on litigation against the plant designer, Fluor Daniel, Anaconda is still locked in arbitration that could see a return of up to $700m (although, if that eventuates, it will go to the US bond holders).
Peter Johnston revealed that the true cost of the Murrin Murrin plant has now reached $1,700m against the original estimate of $960m. The true costs of production are still not known.
Ramp up of production never came close to the original management’s promises of 100% in 12 months. Competitive plants only reached 80% in 2-3 years.
However, Peter Johnston says that a final $70m of capital expenditure will finally see the production ramp up to 92%, or 40,000tpa of nickel plus several thousand tonnes of cobalt, by June next year. “There are no technical problems we do not have a solution to. These will be permanent fixes, not band aids.”
Until this ramp up gives economies of scale, the cost of production cannot be finally arrived at. However, Peter Johnston says that it is clear that Murrin Murrin will never get as low as the 50c/lb originally predicted under Andrew Forrest that was going to put existing sulphide nickel producers out of business.
“The reality is that Murrin Murrin will be a bottom quartile nickel producer but, because of its low grades of an average 1% nickel, will always have to compete with all the world’s existing nickel producers.”
Future technical issues include the declining head grade from the present 1.3% nickel, which may see the need for the “promised but missing” fifth autoclave to be built to increase ore throughput after 2005.
Other issues are the improvement of plant integrity and the building of recoveries from 79% at the time of the management change, through 85% now, to a target of 89%.
As to the other Andrew Forrest growth promises, like three nickel province expansion to three 100,000tpa nickel plants, a magnesium plant, fertiliser plant, rare earths plant, two gas pipelines, water pipelines and so on, these have all been laid to rest.
Commented Peter Johnston, “ At one time Anaconda was committed to $8,000m of growth. All these peripheral activities have been stopped….None of these peripheral projects would ever deliver a return on assets to shareholders.”
The head office count has been reduced from 164 to 28, general managers from 12 to four, overheads from $22m to $6m, and a rebudgetting carried out to ensure that Murrin Murrin remains cash flow positive in its operations, as it has since March this year."
(2) "The vituperative exchanges between Anaconda Nickel Ltd and its 26% shareholder, Anglo American, increased today ahead of the extraordinary general meeting to be held on May 31 at which Anglo wants to sack chief executive, Andrew Forrest, and other senior management.
Anaconda today claimed that Anglo American had been paying hundreds of shareholders $50 to attend shareholder action groups at which it is only revealed at the end that Anglo had organised them.
It also said that the Murrin Murrin nickel laterite plant was now reaching 70% of design capacity in the March quarter, producing 5,714t of nickel and 361t of cobalt. Cash operating costs fell to US$1.32/lb nickel during the quarter with the 34% rise in production.
In return fire, Anglo American has posted a presentation today on its website aimed at Anaconda shareholders. It accuses Anaconda of value destruction, with a “long history of missed and changing targets,” lax corporate governance, high-risk capital structure, capital cost overruns and lost production.
It quotes Anaconda sources to show that the mechanical completion date of the Murrin Murrin plant was two years late, while full production is now 3.5 years late.
It quotes the prospectus as saying that derived forecast production to March 31 this year would be 70-120,000t of nickel against the actual 20,000t. Value lost as a consequence is set at between $218m and $431m.
The capital cost of Murrin Murrin phase 1, estimated from public filings, is $1,695m against an Anaconda-stated figure of $1,030m.
Anglo American asks the question: “Is Anaconda heading down the same path as Cawse and Bulong?” It asks why monthly stock exchange commissioning reports suddenly stopped in March 1999, with several monthly production figures since then not separately announced by Anaconda.
Anglo American’s answer is install a board comprising Anglo American and Glencore nominees to represent the two major shareholders, and to replace Andrew Forrest and chief financial officer, Michael Masterman.
Anglo would also hold an immediate $100m rights issue while a full strategic review is carried out. It insists that its proposals are not a takeover and Anglo would not control the board"
FMG Price at posting:
$2.45 Sentiment: None Disclosure: Not Held
(20min delay)