For Fortescue’s Andrew Forrest, it’s mine, all mine

It is not your ordinary after-school job. It is the year 2000, and Daniel Kerr is under pressure from his mum to get part-time work. The 15-year-old schoolboy wouldn’t mind a few extra dollars given he needs a new set of wheels; he does, after all, have a habit of wearing out skateboards.Kerr looks in the local paper, the Kalgoorlie Miner, and on the public noticeboard before he finds the perfect job. “Money for jam,” he thinks to himself.

An employer is looking for someone to go down to the local mines department once a week and hand-copy information that is lodged by explorers and miners. The job description might raise eyebrows for those living in major cities, but Kerr lives in the heart of Western Australia’s Goldfields region, where almost every job has a red-earth mineral tinge to it.

The teenager reckons he can squeeze in the couple of hours of work after school on a Wednesday, and he soon secures the job on a trial basis. He is given forms to fill in that require quite specific information, such as which companies have applied to the state’s mines department for an exemption to minimum expenditure requirements they must meet in order keep their exploration or mining leases.

It’s unclear why a 15-year-old was hired to do the task. It could simply be the case that in those days, the information was not available online and employing someone – anyone – to hand-copy information from a noticeboard at the Kalgoorlie office made more sense than sending a permanent employee to do it.

Who was Kerr working for? The timing of his employment and the information he passed on coincided with the rise of a secretive two-dollar company called Ajax Mining Nominees, supported by the Andrew Forrest-led Anaconda Nickel.

In 2000 and 2001, Ajax tried to seize almost every significant nickel tenement in the Goldfields region – without revealing the identity of those behind the plan – in one of the most brazen and, at times, vexatious mining company strategies in recent memory.

Over the next 15 years, the billionaire miner, philanthropist, indigenous jobs champion and one of the country’s most influential businessman, Andrew John Forrest, would use questionable means to control the mineral rights to mineral-rich WA.

The strategy would be refined for different purposes: sometimes it would be used to secure mineral deposits on the cheap; other times it would be used to block explorers from his Pilbara childhood home, and, ultimately, it would be used to build Fortescue Metals Group into one of the biggest holders of mineral rights in WA, without fully paying for the privilege.

Mineral rights control

The Australian Financial Review has reported on Forrest’s tactics used to control mineral rights in WA in a series of investigations published since March 2012. This has been backed by documents obtained through Freedom of Information requests and detailed analysis of electronic data compiled by the state’s Department of Mines and Petroleum.

For this story, the same methodology has been used to trace hundreds of exploration applications dating back to the late 1990s. This requires tracing all the different vehicles a company uses to house exploration and mining leases, which relies, in part, on discerning whether multiple companies use a common mailing address.

This information has been coupled with first-hand accounts from dozens of former Anaconda employees, those who competed against the company at rival miners, and tenement tracking experts. Most still work in the industry and would only speak on the condition of anonymity.

The story also relies on the advice of three veteran mining litigation lawyers, and, finally, a now 30-year-old former Kalgoorlie schoolboy who has always suspected the information he passed on was used for opaque purposes.

“I always wondered why they got me to do it,” says Kerr. “I was a kid; I didn’t know what I was doing and I probably made mistakes. I always thought they used me because they didn’t want to reveal their identity.”

First job just the beginning

About two years before the 15-year-old Kalgoorlie schoolboy got his first after-school job, a 1500-strong workforce had nearly completed construction of Anaconda’s nickel-cobalt Murrin Murrin project in the north-eastern Goldfields, near Leonora.

Forrest, a stuttering schoolboy-turned-stockbroker-turned resources company boss who picked up the nickname “silver tongue” because of his captivating ability to sell, was proving the doubters wrong. His nickel hopeful was tantalisingly close to growing up into a bona fide miner.

But it was not enough.

The Forrest-led Anaconda was not designed to be a one-project company. It would produce nickel – used in everything from domestic items such as whitegoods to alloys used in turbines and chemical plants – in such quantities, and for such a low price, that Australia would become the world’s dominant nickel player.

Even though almost every commodity was trading at subdued prices – nickel had fallen to about $US1.85 a pound against the anticipated $US3 price many analysts had based their Murrin Murrin projections at – Anaconda’s exploration team was busy.

Really busy.

“We were spending $10 million a quarter on exploration and the next-biggest competitor was spending five hundred grand,” says a former Anaconda employee, who remains supportive of the company’s achievements under Forrest. “They were amazing days.”

Given the weak commodity prices, there weren’t a lot of jobs for young geologists. Those who did secure work at Anaconda found themselves at the most exciting venture in town. A culture of high energy and late nights developed at Anaconda’s offices on St Georges Terrace, which is Perth’s equivalent to Sydney’s George Street.

“Forrest was forthright and insistent,” says another former employee. “If you didn’t want to go through with what he wanted, the door was open for you to leave. There was no secret about that.”

It was 1998. Forrest was 36, and he was the patriarch of the Anaconda family, complete with a tight-knit group of confidants. These included Anaconda’s chief financial officer, Michael Masterman​, who would go on to join Forrest in an executive role at Fortescue in 2010. Masterman was so committed to the Anaconda dream that he reportedly gave his baby son Isaac the middle name “Murrin”.

In order to dominate the nickel industry, Forrest needed more tenure in WA’s premium nickel territory, the Goldfields.

Some deals were by the book, such as the takeover of Abednego Nickel, which controlled a nickel ore body crunched between Anaconda’s Murrin Murrin interests.

Other deals were strictly off the books.

In late 1998, a mineral tenement was about to become available right next to Anaconda’s Murrin Murrin holdings after an exploration manager, who didn’t see the value in it, decided to offload the lease.

The tenement was even in the same large nickel seam as the one controlled by Anaconda.

There was excitement at the St Georges Terrace offices. Given the location, Anaconda’s geologists and their indefatigable leader, Forrest, saw themselves as the natural and rightful holder of the mineral tenement. By hook or by crook, they were determined to get it.

As per the rules of the game, when several companies lodge their applications for a mineral tenement at the same time – this was sure to happen, given everyone had advance notice this ground was about to become available – applicants would take part in a ballot.

A mining warden, who oversees tenement matters, has a container with a number of hollow balls similar to ping pong balls. He places the names of the competing applicants in the hollow balls, which go into a box. The box is given a hearty shake in front of members of the public and the winning ball is drawn.

In such scenarios, dumb luck should decide the fate of a tenement – each applicant should have the same chance of success.

But that was not enough.

As two former Anaconda employees recall, Forrest asked his team how to maximise the company’s chance that its ball came out.

AFR Weekend can reveal that at 8.30am, October 14, 1998, companies linked to Anaconda lodged no fewer than nine competing applications for the tenement, out of a total of 16. The odds were stacked.

In several instances, according to documentary evidence obtained through the Department of Mines’ online portal, Anaconda employees had their own companies lodge an application. These included Masterman Investments (Michael Masterman), Monti Minerals (Richard Monti​ was one of Anaconda’s key geologists) and Jonathan Charles Downes (a key Forrest supporter at Anaconda and also a relative).

Masterman, Monti and Downes declined to comment for this story.

A spokesman for Forrest says he had no involvement in the matter. That’s odd, given company searches show that Forrest was the signature director of Far East Australia Capital and Far East Commodities Capital at the time, both of which applied for the tenement.

Out of 16 applications, at least nine were linked to Anaconda, giving it a minimum 56.25 per cent chance of success.

The Mining Act precludes multiple applications made “on behalf of” a company to affect a ballot result.

It is common for those involved in a ballot – or lottery, as it is sometimes known – to suss out the competition, particularly if a deal can be negotiated before the ping pong balls are drawn in order to avoid the all-or-nothing consequences determined by Lady Luck.

At least one rival applicant did look at the credentials of the applicants, and immediately spotted the trick. The person, who spoke to AFR Weekend on the condition of anonymity, contacted the state’s mines department.

“From memory, we didn’t have to do much because they knew it stunk,” the person says. “A letter soon arrived in the mail to all the applicants from the department and you had to say you were unrelated to all the other parties.”

Not willing to risk a false declaration, Anaconda withdrew the illegitimate applications, and its odds of success plummeted to one in five, or 20 per cent.

Anaconda’s ping pong ball wasn’t drawn. Neither were those belonging to rivals such as Croesus Mining and Heron Resources.

The tenement would go to a woman by the name of Kirsten Anne Sellars. As the news filtered into Anaconda’s offices, there was only one question people wanted the answer to.

“Talk around the office was ‘Who the f—- is Kirsten Anne Sellars?'” one former employee says.

It would take Forrest two weeks to find out.

Swick hedges bets

Anaconda’s contract drillers were making good profits from the company’s busy exploration program. Chief among those was a drilling company boss named Randal Swick​, who an Anaconda employee says received so much work from Anaconda that he seemed to “rock up to work every fortnight with a new car”.

Swick’s fiancee, and later wife, was named Kirsten Anne Sellars.

It’s not clear why Swick applied for the tenement. He was certainly within his rights to do so, but he did risk his lucrative Anaconda contract work by rubbing up against Forrest.

There are suggestions that Swick got dudded on an Anaconda tender shortly before his decision to lodge an application. Was this the ultimate revenge?

Swick did, however, make a mistake. According to the best hypothesis from piecing together all available information, this is how Forrest found out the company behind the winning application.

The application form filled out on behalf of Kirsten Anne Sellars was faxed to the government’s mines department from the Swick Drilling offices. Whoever sent the fax had forgotten to put a thick black line across the header to prevent the sender’s name, fax number and transmission data being made known.

It is believed that an Anaconda representative went to the mines department to view the winning application after the results of the draw were released. They saw the data at the top of the fax and worked out the connection between Kirsten Anne Sellars and Randal Swick.

Swick got a call from Forrest a fortnight after winning the tenement. The drilling boss, who declined to comment other than confirming he had a “colourful” conversation with Forrest, had his drills immediately removed from Anaconda’s operations. But Swick would get the last laugh.

Unable to match Swick’s drilling results and contract prices, Anaconda would later get him back on site. And Swick – who had spent just $2000 acquiring the prized tenement – would sell it to Anaconda’s successor, Minara Resources, for $5 million in 2005.

Shareholders sceptical

The great ping pong plot had failed – but bigger problems for Forrest were fast approaching.

By 2000, the Murrin Murrin project was up and running, but shareholders were becoming increasingly sceptical of Forrest’s hyperbole, as delays hit the construction and ramp-up timetable at the nickel project.

Forrest was hardly to blame for all the project’s failings – US engineering firm Fluor Daniel would later agree to pay $155 million to settle legal claims for design flaws and breakdowns – but the founding chief executive and face of Anaconda did bear the brunt of criticism.

One of Forrest’s great achievements of getting big-name global miners on to the share register – Anglo American, the giant London-based South African miner, and Glencore, the Swiss multi-national commodities house, were both substantial shareholders – now appeared to be his undoing. Surely one, or both, would soon push for him to be removed.

What was the problem?

Anaconda’s deposits consisted of nickel laterite, which is easy to access – it is close to the earth’s surface – but harder to process than the rarer nickel sulphide deposits.

The sticky clay was heated and pressurised, and sulphuric acid and other reagents used to extract the nickel from the sludge.

Dr Chris Vernon, CSIRO’s program director of ore processing, says extracting nickel from other minerals in laterite ores requires a highly corrosive substance.

“It’s intimately bound up with the very stable host minerals, so you have got to hit it with something fairly aggressive,” Vernon says. “It’s the upfront use of something pretty aggressive like sulphuric acid that dissolves the other minerals that are there and extracts the nickel.”

The acid can be created on site at a plant. You just get sulphur powder and burn it to make sulphur dioxide. Add some oxygen and water – voila, sulphuric acid.

Nickel miners either need their own sulphuric acid plant, or they need to bring it in.

What could possibly go wrong?

At Murrin Murrin, the hot slurry was fed into pig iron alloy tanks – rather than titanium – from the top. The substance splashed back into the vent lines and corroded them.

The corrosive substance took advantage of the slightest weaknesses in the tanks and equipment. These were not mere technical glitches associated with any new plant; they were design and material faults, which took far longer, and more money, to fix.

It wouldn’t be the last time sulphuric acid played havoc with Forrest’s plans.

By July 2000, it looked certain that either Anglo-American or Glencore would make a bid for the company. Both had increased their stakes – by late July 2000, Anglo was at just over 24 per cent and Glencore, 21 per cent.

It was now clear that, one way or another, Forrest’s control over Anaconda was coming to an end. Shareholders would either remove him or the company would be taken over by one of two giants. Then they would remove him.

Ajax Mining makes waves

A plan was hatched.

On August 10, 2000, a young man by the name of Thomas Hugh Jenkins took over as sole director of the two-dollar company called Ajax Mining Nominees.

Ajax soon engaged in a practice called “plainting”, whereby a company alleges that an explorer or miner has not met its minimum exploration or mining expenditure requirements, and should therefore forfeit the mineral rights over a particular parcel of land.

In a matter of months, Ajax had lodged more than 100 plaints in the WA Goldfields. This was, and remains, an unprecedented number of plaints in such a short period of time.

Plainting is not in itself a bad thing and AFR Weekend does not suggest Ajax or Anaconda employees, including Forrest, engaged in any illegal behaviour. In fact, plainting is designed to promote a competitive mining industry that stops companies sitting on potentially valuable land that someone else could develop into an operating mine, creating employment and tax and mineral royalty revenue for governments as they go.

“Certain parts of the industry have regarded ‘plainters’ as bottom-feeders and opportunists,” says mining company litigation expert and Gilbert + Tobin partner Mark Gerus​.

“But the fact is that the Mining Act allows and encourages it when expenditure obligations aren’t met.”

Miners hate it.

Most companies want to hold on to as much valuable tenure as possible, without having to explore and mine it all at once. So long as you are generally developing your assets – and not warehousing en masse – plainting someone wasn’t, and still isn’t, seen as the gentlemanly thing to do in the industry.

“There was a code of conduct in the industry that companies don’t plaint each other,” says one mining company representative who had tenements plainted by Ajax.

“It’s what goes around comes around. Do unto others as you would have them do unto you. If you did plaint, you better make sure your assets were up to scratch.”

But what would happen if you could plaint, but no one knew who to exact revenge on?

The 15-year-old skateboarder in Kalgoorlie was under instruction to record and pass on the details of so-called “minimum expenditure exemption” requests posted on a noticeboard at the local mines department office.

If you want to plaint someone, this is the information you need.

The act of asking the department to waive the minimum expenditure requirements for the past 12 months shows, by definition, that a company has not met its expense obligations.

A company lodging such a request will then provide reasons why it did not spend enough and ask for the department’s forgiveness. A company might argue, for example, that it had spent excessively exploring a nearby tenement, which was part of the same mineral seam.

Ajax’s normal argument was that a company’s reasoning for not spending enough was “insufficiently founded”.

If that argument was successful, Ajax was on its way to securing the tenement.

But all of this takes expertise and money. The act of putting together the plaint paperwork, complete with legal arguments, would cost at least several hundred dollars. Multiply that by more than 100 plaints.

And then when the matter did go to be argued at the mining warden’s court, it would cost several thousand dollars in legal fees.

“Given the legal expense, it’s inconceivable that it wasn’t supported by people in Anaconda’s management – it wasn’t just the frolic of an individual,” says Allens partner and commercial litigator Marshall McKenna, who represented companies being plainted.

Those lawyers who opposed Ajax’s legal representative, Garry Lawton, say he was always careful not to disclose who paid his bills.

He still won’t. Lawton, who now does significant mineral tenement work for Fortescue, did not return multiple calls.

The miners being plainted were furious. Not only was their tenure – their livelihood – under threat, but just the act of being plainted made it almost impossible to build a business, raise money, do deals or list on the stock exchange. Who would invest in a company that suddenly had a question mark over its assets, no matter how frivolous the claim?

Everyone suspected Forrest was behind the trick, but it was difficult to prove.

As one person who got plainted says: “Who would do it? Someone who wanted to get something for nothing – Twiggy.”

No one in the industry had ever heard of Ajax’s sole director, Thomas Hugh Jenkins, or has heard of him since. He used an apartment owned by a family member in the middle-class Perth suburb of Maylands as his mailing address.

The prevailing view among those who were plainted was that the Anaconda masterminds needed an arbitrary person to be listed as the sole director at Ajax. Jenkins was likely a contact, or relative, of someone at Anaconda who probably didn’t know the first thing about tenements.

Plaints for Western Mining

Western Mining Company got hit with more plaints than most – probably because, as a long-established resources company, it had more nickel assets to plaint.

The company, which was taken over by BHP Billiton in 2005, came up with a way to find out whether Anaconda personnel were behind Ajax, according to a source close to the matter.

In 2001, Anaconda’s operations continued to operate at below capacity due to technical issues caused, in part, by problems plaguing its sulphuric acid plant.

It needed a supply of sulphuric acid, so Anaconda representatives contacted Western Mining to see if a deal could be reached to use the rival’s railcars to bring in sulphuric acid to Murrin.

Meanwhile, Western Mining staff had done extensive research into the plaints to see if a pattern could be established. The employees looked into what type of mineral was being targeted – the answer was nickel. They then looked at which companies were targeted – the answer was everyone except Anaconda.

In order to flush the Anaconda personnel out, Western Mining offered the company a contract to use its railcars. The contract said Anaconda could lease its railcars for an agreed sum – and, by the way, if Anaconda was responsible for the plaints, then Anaconda would pay Western Mining $5 million.

The Anaconda reps didn’t sign.

Anaconda-Ajax connection

The Anaconda-Ajax connection was now clear, and, no longer able to operate under the cover of darkness, Ajax’s activities started to be unwound in 2001. Some of its plaints were withdrawn, others simply lapsed.

Forrest lasted longer at Anaconda than most thought he would. He survived a shareholder push to have him removed in mid 2001 by promising to resign the chief executive post at the end of the year.

Forrest stepped down in November that year, and former Western Mining executive Peter Johnston took over as chief executive soon after.

Johnston declined to comment for this story.

There were widespread redundancies, particularly in Anaconda’s exploration and expansion teams, given the new management wanted to resuscitate Murrin Murrin and not pursue a multi-project strategy.

The new management wanted to know how far the Ajax deception reached. One source said KPMG was brought in to do an audit. The results have never been made public, but the plainting stopped, and those who were plainted were offered apologies by Anaconda.

In December 2001, Anaconda’s acting chief executive Stephen Dennis told The Australian that a link between Ajax and “certain personnel” at Anaconda had become apparent.

“Our board became aware of Ajax’s activities only recently,” Dennis said. “It does appear Ajax may have been acting at the direction of certain personnel employed by Anaconda. Those activities are not authorised by the board of Anaconda, which does not condone these types of activities.”

A spokesperson for Forrest says he had no relationship with Ajax or involvement in its activities.

Forrest left the company in May 2002. Not long after, Anaconda reported a $920 million loss for 2001-02.

Former Anaconda board member Malcolm Macpherson, who became a director of the company in April 2002, said it took the best part of a decade for the project to reach its design capacity of producing over 40,000 tonnes of nickel a year.

“When there was spike in the nickel price, we could go from one end of the plant to the other fixing it,” Macpherson says. “That was when there was quite a big spend on rectification.”

The nickel hopeful that wanted to rule the world had to settle for running one project, Murrin Murrin. It still runs today under the control of the rebranded Anaconda, now called Minara Resources, owned by Glencore.

In or around 2002, Anaconda took control of Ajax. It is thought that because Ajax was at least partly financed by the nickel company, Anaconda ultimately had the right to seize the company and then have it deregistered. This occurred in 2003.

So what was Ajax’s purpose?

One person who used to be close to Forrest says Ajax was “Twiggy’s exit strategy”.

“They were setting themselves up for Anaconda mark II,” says the former Anaconda employee who was involved in the company’s expansion plans. “They would have a large mineral tenement base to start from.”

Is there any other explanation? If the Ajax tactic was meant to benefit Anaconda by building its mineral reserves, why was it an unauthorised venture that never had board approval? Why did Anaconda personnel need to do an audit to find out how far the Ajax ties went?

Why was the tactic only employed in 2000 and 2001, when it was clear Forrest might be leaving the nickel miner soon?

AFR Weekend can reveal that one of the key contacts between Anaconda and Ajax was Forrest confidant Jonathan Downes. He was almost certainly acting under Forrest’s instruction.

Knowledge of the operation was limited to just a handful of people. Downes, who now heads small Perth-headquartered resources company Ironbark Zinc, told AFR Weekend: “I am not prepared to discuss this with you.”

Downes is related to Forrest – news reports have described him as a cousin and, at other times, a nephew – and in the years to come he would show his support for his billionaire relative.

In 2010, Downes complained to the competition watchdog over government advertisements promoting the ill-fated resource super-profits tax after reportedly taking advice from one of the tax’s most vocal opponents, Forrest.

Influential business leader

By any measure, Forrest is one of the most influential business leaders in Australia, if not the world.

He fought ferociously against the Rudd/Swan-styled mining tax in 2010, while artfully maintaining a working relationship with the then-prime minister Kevin Rudd. Days before the Labor prime minister was ousted on June 24, 2010 by Julia Gillard, Forrest was engaged in one-on-one discussions with Rudd over designing a compromised tax for the entire industry, such was his influence.

Forrest was later engaged by Tony Abbott’s Liberal government to devise a strategy for Indigenous employment and welfare. He is also at the forefront of a global movement to end modern-day slavery, with the support of religious leaders including Pope Francis.

His philanthropic initiatives are enviable; the billionaire has signed up to the “giving pledge”, which is a campaign organised by Warren Buffett and Bill and Melinda Gates to encourage billionaires to contribute at least half their wealth to charity.

But then there are the less flattering points on his curriculum vitae.

In proceedings brought by two investment bankers against Anaconda over unpaid success fees tied to a US bond issue, Justice John Brownie of the Supreme Court of NSW wrote in his judgment that he regarded Forrest as “quite untruthful”. “Indeed, I think it would be unsafe to rely on any account he has given, in or out of court, except to the extent that it is demonstrated by other evidence to be correct.”

Then there are the accusations, aired widely in 2011, that the Forrest-led Fortescue exploited divisions in the Yindjibarndi community to pursue the company’s plans to mine in the Pilbara’s Solomon Hub iron-ore precinct, located north of Tom Price; a charge Fortescue denies.

And there are his activities on one of Western Australia’s most historic pastoral stations – Minderoo.

Not in my backyard

It is a mild day for the dead of winter, even by Perth standards. Cloud cover during the night encases the city, and, with the heat unable to escape, the temperature doesn’t dip below 11 degrees. There are some morning showers on July 23, 2009, but the skies are clear and the temperature rising by the time veteran auctioneer Malcolm French picks up his gavel as the bidding starts for one of the state’s most famous pastoral leases.

WA’s first premier, John Forrest, and his brothers established the vast pastoral station in the Pilbara’s south-west called Minderoo, watered by the Ashburton River. It would become home to four generations of the Forrest family, including Andrew John Forrest. It was even more than Forrest’s childhood home – it was his ancestors’ burial ground.

French counts about 80 people in the room at the Ridges Hotel, on Perth’s Hay Street, attending the auction of the Minderoo lease. A handful of bidders get involved in the auction – but no one can see Forrest. Is the Fortescue boss really not interested in buying back the family farm?

In 2009, Forrest’s wealth was rising and falling in line with the fluctuating share price of the company he founded, Fortescue, which was by now shipping ore to China, to be turned into steel.

Fortescue’s share price was volatile at the time – but on any measure, the founder and then chief executive was incredibly rich. Forrest’s wealth moved between $9.41 billion in 2008, according to the BRW Rich List, to $2.38 billion (2009), to $4.24 billion (2010).

Never one to show his hand, Forrest decided to send a couple of representatives to the auction, including his solicitor, rather than attend himself. He bought the Minderoo lease with a $12 million bid.

“At that auction, Minderoo went a full circle,” says French. “It was back in Forrest hands, and that was a good thing.”

But it was not enough.

Limited property rights

Forrest understands better than most that a pastoral lease-holder does not enjoy the same sort of property rights a freehold land-holder is entitled to.

Leased land ultimately belongs to the Crown – owned and managed by the state government – and therefore it is usually in a government’s interest to have a good revenue-producing asset on the land. Nothing generates revenue for a government quite like a mine, complete with mineral royalties.

So long as the exploration and mining activities meet various conditions, including Indigenous and environmental standards, a resources company’s rights will invariably trump the interests of a pastoral station operator.

Even the wealthiest lease-holders lose out. Fortescue has built its own business from developing mines on other people’s pastoral stations, including establishing Cloudbreak on Gina Rinehart’s beloved Mulga Downs station – much to her chagrin.

When Forrest bought the Minderoo lease in 2009, several companies were exploring, mining or planning to mine parts of the 230,000-hectare station.

The tactics the billionaire once used to try to control the Goldfields were revised for a different purpose – this time he wanted to protect Minderoo from miners.

“He doesn’t want anyone to put a foot on his pastoral lease with a shovel,” says prospector and sand miner Warren Slater, who has sparred with Forrest for years in court. “He just can’t stand anyone having a machine on his property – his property, that’s what he says, his property.”

I ask Slater whether he has spent a lot in legal fees fighting Forrest.

He replies: “Is the pope Catholic?”

Within months of Forrest buying back the family farm, Fortescue lodged exploration applications over thousands of square kilometres at Minderoo. The Fortescue founder had worked out that the best way to control who looks for minerals on your land is to control the mineral rights.

There were, however, a few hurdles to make the plan work.

In order to retain its exploration leases, Fortescue would have to meet minimum expenditure requirements, which can be tens of thousands of dollars per lease, to develop land it had no intention of mining.

And so, every time a Fortescue application was made, a private company representing Minderoo interests objected to it. The private company, Forrest & Forrest, is owned by Andrew and his brother, David.

By objecting to the exploration applications, Forrest could engage in “negotiations” with the company he founded and led, Fortescue. The discussions would go on for years, and the land was kept from exploration because companies with bona fide exploration ambitions couldn’t get access.

Meanwhile, the state’s Mining Act is designed to encourage exploration, not quarantine land from exploration.

The negotiations between Forrest and Fortescue kept the leases in an administrative “pending” state, as opposed to being “granted”.

Because the exploration leases were not yet granted, Fortescue was not required to explore, nor meet minimum expenditure requirements. It could control the tenements for free.

Fortescue could not hold on to the tenements indefinitely. After several years, and with administrative pressure starting to be exerted to “use or lose” its Minderoo leases, as per one of the tenets of the Mining Act, the iron ore miner started relinquishing control in late 2013.

But the exploration leases did not go out to a competitive market.

AFR Weekend investigations revealed at the time that Forrest’s friend, fellow Cottesloe resident Christopher Dale, used a self-managed super fund called Richcab to secure the ground within minutes of it becoming available, before the most sophisticated tenement-tracking technology could know Fortescue had ceded control.

Once again, Forrest & Forrest objected to the applications, triggering another round of negotiations. The tactic would, however, be less successful this time around. A mining warden questioned whether a self-managed super fund could be an explorer, and ultimately recommended the state void the applications.

This was carried out on July 6, 2015, but not before another vehicle linked to Forrest – called Pilbara Property Management – applied for much of the same ground that Richcab’s applications covered.

In-depth mapping of tenement holdings show that, as at July, companies linked to Forrest now control 1378 square kilometres of Minderoo exploration and mining tenure, representing 61 per cent of the station’s grounds. The vehicles have also started appearing on a neighbouring pastoral lease now under Forrest’s control called Uaroo.

“The bulk of Minderoo is covered by exploration tenement applications and not granted tenure – so there is no exploration activity and no rent to pay,” a tenement tracking expert says.

A spokesman for Forrest says the Minderoo tenements are being actively explored.

“We plan to meet all requirements under the appropriate act,” the spokesperson says.  “The area has exploration potential for base metals, oil and gas and is a known uranium province.”

Forrest has long maintained that he supports mining on Minderoo with appropriate environmental protections. His spokesman says, “All future mining potential will have to be in full compliance with environmental regulations and ensure the area is returned to its original state or better.”

Plans to triple production

Not long before the iron ore spot price spiked at over $US180 a tonne in February 2011, Fortescue had announced plans to almost triple production to 155 million tonnes per annum.

It had answered the only question investors had for iron ore miners at that time: how much ore can you export to China and how fast can you do it?

Like Anaconda before it, Fortescue under Forrest would not easily be satisfied – it needed more mineral tenure.

The company’s 2011 annual report boasted that it had “85,000 square kilometres of the most prospective and profitable iron ore mining region in the world, dwarfing the size of all competitors”.

The annual report failed to mention Fortescue wasn’t actually exploring all of that tenure – not even close.

How could Fortescue, as successful as it was at the time and as prolific an explorer as it was, really explore and mine an area larger than Tasmania?

In a strategy resembling that used to protect Minderoo, Fortescue had to keep a good portion of its leases in a “pending” state so that it did not have to meet minimum expenditure requirements on all the tenure.

Analysis of data from 2012 shows Fortescue had just over 60 per cent of its land mass in pending leases.

In one example, Fortescue had an agreement to explore on land with the native title-holders, the Kariyarra​. For reasons never explained, the iron ore miner took more than six years to turn some of the pending leases into live ones; a process that could have taken just a few months.

There are valid reasons for having pending tenure, but industry participants hoping to reform the sector have long expressed dismay at the inability of government departments to keep up with companies’ stalling tactics.

Palmer United Party senator and former resources company executive Dio Wang says the state government needs to ensure land is explored, or handed over for someone else to explore.

“There should be more strict tests,” Wang says.

Companies are known to keep tenements in a pending state by putting in incomplete paperwork to the mines department, or stalling negotiations on land access with pastoral lease-holders or indigenous groups.

“Objections by pastoralists may be commonplace, but generally they are not an impediment to grant,” says Gerus, from lawyers Gilbert + Tobin. “However, much time is wasted in purported access agreement negotiations for exploration tenements.”

Analysis of tenement databases show that Fortescue’s tenement holdings have decreased in the past few years to 68,830 square kilometres of tenure, just over 27 per cent of which is in a pending state.

The decreased percentage held in a pending state is partly attributed to Fortescue relinquishing control of the Minderoo tenements, many of which are now under the control of vehicles linked to Forrest. It has also ceded control of a 500 kilometre coastal strip of pending leases near the World Heritage-listed Ningaloo Reef that few believed the iron ore miner had any real desire to explore.

Fortescue’s land bank still dwarfs the mineral tenure controlled by the two majors: BHP has 10,848 square kilometres of tenure (20 per cent is pending); and Rio has 14,038 square kilometres (8 per cent pending).

Over more than a 15-year period, Forrest’s tactics to control WA’s mineral-rich red dirt have been refined for different purposes: sometimes they were used to try to secure deposits on the cheap; other times they were used to block explorers from his childhood home; and, ultimately, they were used to build Fortescue into one of the biggest holders of mineral rights in the state, without fully paying for the privilege.

But will it be enough?

 

Source: For Fortescue’s Andrew Forrest, it’s mine, all mine | afr.com

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