Unravelling was the business empire of Nathan Tinkler, a man who burst onto the coal scene less than a decade ago and is starting to look like he’s about to burst out.
Consolidating in a way that could force international intervention to curb its success is the merged Glencore/Xstrata, a business that will soon control a stunning one-third of the world’s thermal coal trade, enough to dictate the global coal price.
More on the merger of Glencore and Xstrata later, because it is the story of tomorrow. Tinkler is the story of yesterday and today.
So far, most public interest in the trials of Tinkler has been in the buffeting from debt pressures that seem to be coming from all directions.
In the past few days, two of his private companies have been tipped into court-ordered liquidation, a last-ditch event from which there are few comebacks.
First to go was Mulsanne Resources, which has been struggling with a debt claimed by Blackwood Corporation, an emerging coalminer.
Next into the liquidation pot went Platinack Farm Administration, a horse breeding business said to employ 200 workers but lacking the funds to keep trading.
It is not up to The Hog to pass judgment on Tinkler or the many companies he runs. That is being done by courts, creditors and investors.
The courts are appointing liquidators. Creditors are demanding money, and investors earlier this week drove the share price of the company in which Tinkler has the bulk of his fortune, Whitehaven Coal, down to a 12-month share price low of $2.70.
The share price, and the value it confers on the stake held by the Tinkler-controlled Aston Resources in Whitehaven is the absolute key to what is happening, and that is where the numbers become quite interesting.
According to the latest Whitehaven annual report, Aston owns 216,589,946 shares in Whitehaven, equivalent to 21.38% of the company.
At the last Whitehaven share price seen by The Hog, $2.76, the value of Aston’s stake stood at $597.8 million. That is less than half the $1.21 billion Aston’s stake was worth earlier this year when there was talk of a takeover in the air.
Watching the best part of $600 million fade from view as Whitehaven’s share price has crumbled under the pressure of falling coal prices and slow progress on mine-development plans must be a horrible experience for Tinkler.
It would also have been a fairly grim experience for the bankers who have stood behind his rise in the coal world as they have watched the share price slide.
It is those bankers, including Farallon Capital, which will soon have to decide what to do with their relationship with Aston.
They can wait for a turn in the coal market. Wait for a chance to fund a fresh takeover bid by Aston sometime after January when a bid standstill agreement expires, or they can take independent action.
Whatever the route chosen there seems little doubt that the Whitehaven/Aston situation is moving into its end phase. This is why The Hog/i> refers to the current status as the beginning of the end.
Meanwhile, in a Swiss city far-far away, something potentially more interesting is happening as a coal colossus is born and government regulators get the first hint of what they have allowed.
According to some estimates, the merged Glencore/Xstrata will have a bigger say in the global thermal coal price than Saudi Arabia has in oil.
For coal miners this might not be a bad thing because while GlenStrata is big it is not the owner of the world’s best and lowest cost coal mines.
That means it will be using the influence it has in the coal market to push prices higher as an essential step in surviving, and then in prospering.
Shareholders in GlenStrata will also benefit handsomely from the coal control conferred in their newly merged business.
Governments and coal customers, on the other hand, must be wondering where GlenStrata will take the coal price, and whether they have waved through a deal which will cost them dearly in the future.
It is what lies ahead for the coal division of GlenStrata, which prompted The Hog to call its creation as the end of the beginning – with years of market manoeuvres and possible government intervention to come.
