02/08/2017 - 12:09

CEO lunch with David Flanagan

02/08/2017 - 12:09

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The value of a strong team in a crisis was highlighted by mining chief David Flanagan during his recent discussion with Business News.

CEO lunch with David Flanagan

Looking back on a dramatic career like that of mining executive David Flanagan, it is clear the extent to which a stint of work experience and an industry vocational visit influenced his subsequent choices.

Like many 15 year olds, Mr Flanagan had few clues about his future.

“One of my mates was going to go and do a geology type work experience thing with Cable Sands, and that was Geoff Davies,” Mr Flanagan told Business News.

“His dad, Chris Davies, was the exploration manager, and he hosted us for a couple of weeks. And I just loved it … absolutely just loved being in the bush.”

That experience was followed closely by an industry sponsored visit to Kalgoorlie’s School of Mines.

“They were people who worked in mines and lectured, and it just sounded fascinating, you know, the fact that we went underground at Kambalda, we visited open pits, we looked at processing facilities, we got a feel for Kalgoorlie, which is a wonderful mining town, and I literally just stuck with geology, because I decided I would until something better came along, and nothing did,” Mr Flanagan said.

It was a career choice that sits well with his future as a mining company chief, including his current role as executive chairman of Battery Minerals.

“As an exploration geologist, you have this opportunity to devise a theory or a thesis or a hypothesis to then go and test,” he said.

“How awesome is that?”

Another early experience might have been a lesson for a different kind of future – managing an exploration crew in the wilds of Sumatra, Indonesia, that would sometimes disappear into the air-conditioned comfort of a vehicle and listen to music.

Some chiding in Bahasa got the crew back to work, except for one individual.

“This guy reached into his pocket and pulled out a gun and stuck it in my face. I was looking down the barrel of the gun.”

“I then basically let him stay in the car and he could listen to whatever music he wanted and he could turn the air-conditioning right up; but I later on found out that he didn’t understand what I was saying, and that he was a policeman supervising our loading of the explosives, and that was him just showing me his credentials of who he was and that he didn’t need to work.”

“But I still got a fright.”

The theoretical side of geology inevitably resulted in the success of Atlas Iron, Mr Flanagan’s first foray as boss.

Atlas was not focused on iron ore initially. However, rising prices in the early-to-mid 2000s and a correct prediction by geologists Mark Gunther and Dave Archer that a productive rock type existed throughout the northern Pilbara provided the incentive to embark on an acquisition spree.

“Our immediate objective was to just ... anything that had an indication of that sort of geology, grab it,” MrFlanagan said.

“It was a lot of fun, because it created lots of subsequent deal flow, because people would want to deal with us.

“And that kind of drove tenement sellers towards us compared to our peers.

“And I would say that that accumulation of tenements is one of the key reasons why Atlas is still operating.”

The former Atlas boss finds it quite emotional to recall the turnaround of the business after the iron ore price collapsed below $US40 .

In part there are bitter reminders of some parties who showed their darker side and did things he thinks were “inexcusable”, but there are also fonder memories of those who backed him and his key management team of executives, including Jeremy Sinclair, Mark Hancock and Tony Walsh.

And it wasn’t just the key executives who contributed, with Mr Flanagan recalling a field assistant who had identified a road to haul ore from a potential mine site.

“At a point, this was the single most important thing in the company,” he said.

“In identifying this road, we were able to reduce the haulage distance, and then reduce the haulage cost, and demonstrate the viability of that deposit, which thereby allowed us to identify and recognise the value of that deposit in a way which gave us a balance sheet value which allowed us to defend the covenant ratio … which if we had breached we wouldn’t have survived.

“By the end of it, to be honest, there’s this thing where people … stand on the shoulders of the people beneath them.

“I reckon that when we got through this process I felt like I was carried over the line by the people I work with.

“It was just exhausting.”

Mr Flanagan believes a pivotal moment in the rescue of Atlas was when various contracting group players, including MACA, QUBE Holdings and McAleese, which were prepared to back a deal, met with a representative of the existing financiers who asked why they had committed to such an arrangement.

“And (Maca operations director) Geoff (Baker) said to this guy, ‘Have a look at them,’ and he’s pointing to Walsh, Hancock, Sinclair, and me, he said, ‘These guys are pinning their ears back, they’re throwing their own money at this deal, and everything that they’ve got. How could you not? How could you not put yourself with those guys and have a crack at making it work?” Mr Flanagan told Business News.

“In all of this there’s all sorts of numbers-type things, but this banking guy who was there on the day, that affected him, I reckon, because everyone was absolutely authentic.

“And it wasn’t just about dollars and cents, it was about doing the right thing.”

The former Atlas chief said he has been asked many times about the key reason the company received the backing it did.

“I think that we all had shared values, we all recognised and valued similar things, and we all wanted to make it work, and we could all see that once we got through it, there was an opportunity to make money,” Mr Flanagan said.

“And subsequently, those people who partnered with us then came back and made more money than they would have made had they not dropped their rates.”

While all that was going on, in the background another issue was grinding on, having flared up before the iron ore crash. As chancellor of Murdoch University, Mr Flanagan had to deal with a Crime and Corruption Commission investigation into then vice-chancellor Richard Higgott.

Again, he rates the people around him, with a sub-committee of key Murdoch people and several external consultants, including lawyers Margie Tannock and Bruno Di Girolami, communications adviser Paul Plowman and a forensics team from KPMG.

“I felt very well supported … and then when we presented the information to the full senate, they immediately resolved unanimously to back everything we were recommending,” Mr Flanagan said.

“So it was done in a timely manner, it was as cost effective as it could have been.”

Having managed a way through two major crises simultaneously, Mr Flanagan said having the strong support of his wife, Sarah, was critical, as was keeping fit.

At corporate level, however, he acknowledges it is all about the people.

“I think the key to it is to surround yourself with the very best people you can find, and to promote a culture among those people of complete transparency,” Mr Flanagan said.

“(You also need) an environment where people contribute their perspective to key decisions, so that each time you make a decision, you make the very best one you can at the time.”

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