Mining minnows making the grade

With so much wealth sloshing around Western Australia’s mining sector it would be easy to believe many in the industry had hit the jackpot.

In most cases, nothing could be further from the truth.

Many of these executives have ridden out the lean years committed to an industry they love, often falling victim to various consolidations along the way.

Some have taken huge risks to earn their fortunes, which often remain as vulnerable as the shares they represent.

A case in point is that of Rob Vagnoni and Paul Kopejka, the founders of West Perth-based iron ore miner Murchison Metals Ltd, which has operations in the Mid West.

These days the pair are among WA’s richest miners, at least on paper, with around $200 million in shares and options between them. Mr Kopejka’s stake is worth around $125 million and Mr Vagnoni’s $75 million.

Even Murchison managing director Trevor Matthews, a latecomer to the company, has amassed shares and options worth almost $30 million.

These fortunes may have been made in the blink of an eye, but as Mr Vagnoni recalls, it was only about three years ago the miner faced losing it all as it struggled to find investors with sufficient faith in the prospects for the little-known iron province.

In August 2004, Messrs Kopejka and Vagnoni had their hands on what they thought were promising leases in the Mid West, a few areas from the holdings of the failed Kingstream Resources Ltd, which had been picked up by some desk bound prospectors after they had been allowed to lapse.

Mr Vagnoni and Mr Kopejka had agreed to pay about $1 million for the leases, made in staggered non-refundable payments.

With around $500,000 invested, they had fallen short of a deadline and had nothing left of their own to commit to the project.

“There was a period where we struggled to meet the next payment, whereby the whole arrangement or deal would fall over,” Mr Vagnoni remembers.

While it all seems so obvious now, back then there were a lot of jitters in the market about how much regulation Chinese buyers might face in their overheated economy and how that might affect the iron ore price.

It was a pretty important point for a small project in the relatively unknown Mid West province, that was planning to rely on high-cost trucking to supply the volatile spot market.

In the end, they kept banging on doors and eventually found investors in Sydney who were happy to take the risk.

“We simply persisted,” Mr Vagnoni said.

But the success of Murchison was not assured yet. The next stumbling block was the early listing the backers wanted to achieve to take advantage of improving conditions ahead of others in the sector. Unfortunately, the market was already booming and there was something of a logjam of new issues in a year when about 100 WA-based companies joined the stock market.

“There was a large number of companies wanting to get listed,” Mr Vagnoni told WA Business News.

“It was quite a frustrating time; we wanted to list as quickly as possible to get access to this window of opportunity in the iron ore industry.”

The records show the pair got their way, listing in April 2005, closing on debut at 32 cents, a 60 per cent premium to its 20 cent per share subscription price, after finding a broker in Sydney, Martin Place Securities, to back its float plans.

The listing success – the shares are now trading above $5 each – was not the end of the rewards reaped by the founders’ hard work.

The pair had travelled extensively to find potential trading partners for their ore in north Asia.

Those connections have paid off handsomely, though there is some irony that despite the Chinese-driven nature of the boom, Murchison’s international partners have been South Korea’s POSCO and Japanese giant, Mitsubishi.

A further irony is that the Mitsubishi link came from its astute Perth-based representative, who found a way for his company to get involved with such a minnow.

Both have proved integral to Murchison’s ability to get a mine up and running, as well as being a key contender for the $3 billion port and rail infrastructure planned for the region.

“I’m not sure Mitsubishi knew what to do with us,” Mr Vagnoni said.

“We were just nobody, just a couple of guys with project development experience.”