Local directors’ stakes anchored in calm waters after business navigates GFC

FORTUNES made from iron ore dominate the WA Business News list of wealth creators, with 12 directors found to hold stock worth more than $10.9 million.

Most have been with the companies since listing, including the majority of the 16 local directors worth $100 million or more.

Since the last time WA Business News took a snapshot of the state’s wealth creators in May 2010, just after the Resource Super Profits Tax was announced, the composition and combined value of the list of leading directors by shareholding has not changed as dramatically as market watchers might have expected.

Despite all the news about the mining sector forging ahead and leaving the rest of the economy for dead, however, it is hard to spot such a trend among these numbers from our previous survey in May 2010.

Certainly, Fortescue Metals Group chairman Andrew Forrest has bumped up the value of his holding by more than $1 billion in that period of more than a year, to $5.73 billion last week (see full list, attached) from $4.67 billion in May 2010.

That would represent $1 of his share price in a stock that remains volatile due to the world economy, commodity prices and special circumstances surrounding FMG, which is undergoing a transition to a more process-driven company.

Below that it is hard to pick big changes in either the ranking of directors or the numbers that met our criteria. Last year we cut off the list at holdings of $10 million or more. This year the cut moves up to almost $11 million, a surprisingly small move given the hype around resources, particularly iron ore, which has generated so much commentary over the period.

One new entrant to the directors’ list is Gina Rinehart (see Rinehart spends to spread influence). Until late in 2010, she was not a director of a listed company. By joining the board of Ten Network Holdings she debuts on this list at number five when the stakes of two other companies are included. 

Of course, Mrs Rinehart’s public holdings are dwarfed by her private fortune, a number estimated to be north of $10 billion. Interestingly, that value has risen dramatically in the past year based on progress in her developments and the rise in iron ore prices. 

Furthermore, the BRW estimate quoted as representing her total wealth was published in May when the resources sector was strongest in the market.

Another new entrant near the top of the main list is Max Begley, the founder of Matrix Composites and Engineering. At more than $90 million, his stake reflects his enormous success over a 50-year career in developing a business that has become a major manufacturer and value-added exporter based in WA. And they said it couldn’t be done.

His son, Aaron, who is CEO and led the company at listing less than two years ago, just missed out on making this list with holdings valued slightly above $10 million.

Matrix shares have dropped significantly since earlier this year when both these directors would have easily made the list.

Another new entrant is Nik Zuks, whose Perth-based company Bellzone Mining is listed on the London Stock Exchange’s Alternative Investment Market. 

Bellzone has an iron ore project in West Africa.

Mr Zuks is best known in WA for leading the ill-fated Kingstream Resources in the 1990s. Kingstream sought to build a steel mill at Oakajee near Geraldton to process iron ore from the nearby mines and export the finished product through a new port.

More than a decade later, the iron ore mines are operating but the infrastructure such as the port remains tantalisingly out of reach.

Another offshore company with a director on this list is Centamin Eyqpt, which is domiciled here but has delisted from the ASX and has its shares traded in Canada and the UK.

Centamin chairman Joseph El-Raghy’s share value has taken a bit of a hit over the period WA Business News has examined, possibly due to the political turmoil in Egypt where his company has a working gold mine.

At the top end of the list the composition remains much the same, with the founders of successful mining enterprises Aquila Resources, such as Tony Poli and Charles Bass, and Mineral Resources, including Chris Ellison, Steve Wyatt and Bob Gavranich, liberally sprinkled among the among the top 10. 

However, there are contrasts in this performance. The value of the personal stake of Aquila’s Mr Poli has slumped from nearly $850 million in May 2010 to around $500 million today, even though he has topped up his shareholding significantly in that period.

In contrast, Mineral Resources founder Mr Ellison has seen the value of his stake rise from around $265 million to $336 million despite cashing in $35.9 million in shares in the company in an off-market trade late last year, taking his total sales in the past year to almost $90 million.

In late 2009, Mr Ellison paid $57.5 million for iron ore heiress Angela Bennett’s house in Mosman Park, officially taking the record as the most expensive home in Australia.

His colleague Mr Wyatt recently bought Alan Bond’s former Dalkeith home for $39 million.

Uranium miner Paladin Energy founder John Borshoff has seen the value of his stake slide from $90 million in May last year to around $34 million. It has been a tumultuous year for nuclear power with the catastrophe created by the Japanese earthquake and tsunami.

Mining services has been strong. Ron Sayers’ stake in Ausdrill has increased in value considerably, as has that of Greg Tate in Fleetwood. 

It will be interesting to see what becomes of former NRW Holdings CEO Jeff McGlinn, who quit the company more than a year ago and then sold down his stake to raise almost $42 million. Mr McGlinn is reviving a business closed down by NRW, heavy machinery and earthmoving equipment supplier Promac Sales. NRW has continued to revive its fortunes after a tough period post listing.

Property remains a significant component of the WA Business News wealth creators list. Although there have been some mixed results, it has not shaken up the league ladder this year.

For instance, Peet chairman Tony Lennon remains well near the top of the list, with more than 80 million shares worth $104 million close to half of the value of his stock last year.

By comparison, Cedar Woods chairman Bill Hames has edged his way up the middle part of the list while the value of his shares have grown to about $33 million from $19 million.

Consumer-linked company directors have also had a mixed year, perhaps reflecting the difficulties for much of the retail market as belts have been tightened.

Perhaps no-one has seen this more than founder of global education provider Navitas, Rod Jones, who remains near the top of the list despite a difficult year for the group, which has hit the value of his considerable stake.

Navitas provides university bridging options, English language, and vocational courses to students in several major markets. The GFC, coupled with poor government policy in Australia and the UK, have hampered his business, though it remains on a growth trajectory.

Internet service provider iiNet managing director Michael Malone has seen the value of his stake drop by about 20 per cent.

Automotive Holdings Group chairman Bob Branchi has seen a similar fall in the value of his stake.

However, boutique brewer Little World Beverages has performed better, ensuring a cluster of directors, led by Adrian Fini, have remained entrenched on the list.

Among the lower order of the list are two intriguing new entrants, Matthew Wood and Tim Flavel, who have entered the list by virtue of their roles at multiple companies, which in combination amount to a significant total.

Mr Wood and Mr Flavel are both from corporate advisory firm Garrison Capital, which also includes veteran insolvency expert Brian McMaster on its board. The group has backed multiple ASX plays, notably Mongolian group Hunnu Coal.

The pair take a portfolio approach to their directorships and venture capital investments, which often puts them under the radar unless all are tallied up, as is the case in this instance.

Others on the list that take a similar approach are Craig Burton and Alasdair Cooke, from the Mitchell River Group. 

Another successful exponent of this approach is Ian Middlemas. He has amassed shares worth $30 million (that WA Business News is aware of), while his partner Mark Pearce did not make the list with a portfolio worth an estimated $7 million.

According to WA Business News records, Mr Middlemas and Mr Pearce are both members of the boards of at least five listed companies. They were also both board members of Mantra Resources, although Mr Pearce stepped down as a director about 12 months before Mantra merged with JSC Atomredmetzoloto earlier this year in a deal that, at the time, valued Mr Middlemas’s stake at about $11 million.

The bulk of Mr Middlemas’ individual wealth is held in Coalspur Mines, one of more than a dozen foreign-focused coal companies based in Perth.

Coalspur’s move to develop thermal projects in Alberta, Canada, has paid off handsomely for Mr Middlemas, who is chairman and has a stake in the company worth just under $23 million via his private investment vehicle Arredo Pty Ltd.