01/02/2005 - 21:00

Tim Treadgold: Briefcase: When will the big ticket arrive?

01/02/2005 - 21:00


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What would a WA election be without a big ticket prize for the people. So far, we haven’t seen anything to rival past elections. There have been higher wages promised for nurses, and more police on the beat.

What would a WA election be without a big ticket prize for the people. So far, we haven’t seen anything to rival past elections. There have been higher wages promised for nurses, and more police on the beat. But where is the steel mill, the new LNG project, the South West pulp and paper mill, or that old favourite, a petrochemical plant.

A casual reader may think Briefcase displays an unusual degree of cynicism about matters political with those remarks – in which case that reader has been living on the moon for the past 30 years.

WA is a pro-development State, we have proved that over the decades. There is barely a moment’s notice given to the major political party that is too pro-environment, a point the Australian Labor Party will discover in the South West where communities hold a deep resentment over anti-logging policies and the impact it has had.

It is partly with that in mind that Briefcase thought it time to have a look at the resource rabbits that might be living in the hats of our esteemed leaders. Would it be too far-fetched to imagine that Colin Barnett is dreaming of a policy that will fast-track expansion of alumina refineries in the South West, that would do wonders for winning back Bunbury.

Or that Geoff Gallop really is a true believer in a steel mill for Geraldton, even if he did rubbish the last proposal from Ken Court, brother (and son) of an ex-Premier. Giving Geraldton a shot in the arm could be just the thing to retain that seat.

The point being made is that WA has a ridiculously long list of projects-in-waiting. Iron ore projects are almost falling from the trees.

Is it too hard to imagine Andrew Forrest standing alongside Geoff or Colin announcing a firm commitment to one of the several variations on a theme proposed by Fortescue Metals? Or Geoff down at Rio Tinto’s HIsmelt project gaily turning a sod or two – not something that straight-haired Colin would want to be seen doing well, not gaily, anyway.

Picking which project lends itself to the political game is what amuses Briefcase and on that score he has a nominee – Gorgon LNG.

By any measure, this is the big one to get electors excited. The price is right, around $11 billion (give or take a billion), parliament is compliant, the project partners are busy recruiting staff and all that is needed is a firm sales agreement – or something that sounds firm such as a document called a binding agreement to buy (whatever that means), or an equally obtuse memorandum of understanding.

The Gorgon crew is also known to have finely-tuned political instincts and staff members with an intimate knowledge of how the political game is played. On that score, there is every reason to believe an announcement on Gorgon by Geoff would not only be timely for the election, but well supported by the management team keen to stay on good terms with the government of the day. And if the government should change, well you could always argue that you were coerced into it (privately, of course).

Before anyone dashes a letter off complaining about how horribly cynical Briefcase is, be warned. It has seen first hand exactly how the game is played, and can even call on the wisdom of a departing member of parliament, Phil Pendal, to corroborate. In 1977 then Premier Charles Court demanded an announcement on the go-ahead of the Wagerup alumina refinery even though Alcoa wasn’t ready, and neither was Andrew Mensaros, then the resources minister.

A statement of Wagerup’s go ahead was duly drafted because Charlie’s nose told him a big ticket item was needed.

It was cleared by the man himself while on tour in Halls Creek, the electorate was duly impressed – and after the election Wagerup went back into the design box while Alcoa waited for market conditions to be just right.

As they say in the classics: here we go again.

WHILE in a darkly cynical mood can anyone explain to Briefcase what’s going on at Clinical Cell Culture, the company co-founded by Australian of the year and all-round hero, Fiona Wood.

While Dr Fiona has been collecting accolades and admiration from the Prime Minister down, the share price of CCC drifts like a lump of flotsam in the Sargasso Sea. In fact, it does slightly worse than that, it has been showing signs of losing its buoyancy altogether.

Last April, when enthusiasm for CCC was at its highest and the world was enthralled by the concept of spray-on skin for burns victims, the stock traded as high as 59 cents. In July, a somewhat jaundiced Briefcase asked a few pointed questions, such as where was the business case to back up the publicity. At the time of that first (and only) criticism of CCC the stock had eased down to 47 cents.

The price today is close to 38 cents and Briefcase is horrified (tongue in cheek division) to report that the net effect of Fiona winning her national gong was zilch – and perhaps, it might be argued, a teensy-weensy bit negative.

On the day before the Australia Day holiday, and the announcement, CCC closed at 37.5 cents.

On the day after a feast of publicity the stock closed at 37 cents. When Briefcase looked just before the publication deadline of this august journal the stock had heaved its way back up to 37.5 cents.

Concerned that the business case question remains valid, Briefcase dug around the workings of CCC. It even chatted to newly appointed board member, Mark Barnaba. He said all was well, but best ask the chairman, Dalton Gooding.

Unfortunately Dalton is overseas until February 18.

In any event, Briefcase continued digging and found less evidence than before to support the business case.

True, there are glowing reports that spray-on skin is destined to heal the world, but that may prove tough with the company’s staff (and head office) relocating to Cambridge in the UK, while four members of the five-person board remain in Perth.

That structure just begs another question about how CCC proposes to become a business, a point Mark dismisses as being far too cynical while pointing to a recent broker report which says CCC has $14 million in cash and can be valued at $1.13 a share.

Briefcase, conceding to a smarter head, says perhaps all will come good. However, with a cost structure now European based it had better be soon because $14 million South Pacific pesos do not buy much in the way of marketing in Europe; in fact they buy roughly 8 million euros worth, or around £5.6 million in real money, which ain’t much in the world of global commerce, which raises the final point. Is that another CCC capital raising Briefcase can smell in Mark’s briefcase?

 “A cynic is not merely one who reads bitter lessons from the past, he is prematurely disappointed in the future.” Sydney Harris.


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