19/10/2021 - 08:00

Veteran Kiernan rides commodity cycles

19/10/2021 - 08:00

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From struggling junior explorers to booming miners, Tony Kiernan has a breadth of experience few company directors can match.

Veteran Kiernan rides commodity cycles
Tony Kiernan says management should be able to tap into the expertise of non-executive directors. Photo: David Henry

It is nearly 40 years ago Tony Kiernan accepted his first board role at a listed company, with the aptly named Gold and Mineral Exploration NL.

Since then, he has racked up a long list of board roles that have given him a front-row seat at many of the big trends in Western Australian mining.

As chairman of BC Iron, he rode WA’s last iron ore boom, striking deals with Andrew Forrest’s Fortescue Metals Group along the way.

That was followed by Saracen Mineral Holdings, which grew to be one of WA’s largest gold miners, buying half of Kalgoorlie’s Super Pit and merging last year with Northern Star Resources.

He has also experienced the ups and downs of the lithium market as chair of Pilbara Minerals, which ranks as one of WA’s top 10 mining companies by market value.

Remarkably, half of WA’s top 20 companies have exposure to lithium and other ‘critical’ minerals, signalling clearly where investors see the future.

Over his career, Mr Kiernan has also seen major shifts in directors’ responsibilities, with an increased focus on corporate governance and ESG (environmental, social and governance) issues. pil

He has moved with the times – in fact, lithium miners like Pilbara Minerals are among the big winners from the ESG trend – but the old-school West Perth entrepreneur still shines through.

“You need to have practical directors, some just go to water,” he told Business News.

“You need to chest up and do what is responsible, some directors are a bit limpy.”

In a similar vein, he takes a very pragmatic approach when discussing the increased legal risks facing company directors.

“If you go and see a lawyer, they will scare the shit out of you,” he says.

“But if you are sensible and have good people around you, the risks are manageable, they don’t frighten me.

“There are risks but they are calculated risks.”

Mr Kiernan, who worked as a lawyer before becoming a professional director, says business runs in his blood.

“I come from a business family,” he says.

“I happen to like business, fortunately or unfortunately.”

His father, Laurie, was a trucking contractor who later became managing director of Channel 9 in Perth.

His brother, Michael, ran Consolidated Minerals, which was one of WA’s major mining companies during the 1990s and early ‘noughties’.

Michael’s business empire came crashing down after the GFC whereas Tony’s fortunes have been on the rise.

Mr Kiernan started working for listed companies in the early 1980s, initially working out of an office with good friend Tim Goyder.

“I started to do a lot of work for junior companies when they couldn’t afford lawyers; I capitalised my time and took stock.”

He met Mr Goyder when they both invested in a property syndicate and found a kindred spirit.

“We actually found we were a little bit more entrepreneurial than the other guys in the property syndicate.”

The two men have served together on multiple boards over the years.

This includes two companies – Chalice Mining and Liontown Resources – that have become spectacular successes in recent years.

“I learnt a lot from Tim,” Mr Kiernan says.

“He taught me to keep sticking at it and believe in what you are doing.”

BC Iron

Iron ore company BC Iron was one of the high points of Mr Kiernan’s career.

He and chief executive Mike Young listed the company in 2006, in the very early days of the last iron ore boom.

“We raised $6 million, drilled the resource out and rode the iron ore boom,” he says.

Of course, it wasn’t that easy because, like many other companies, it could easily have been left with a ‘stranded’ iron ore deposit.

“The most difficult decision was bulk transport,” he says.

“We had to negotiate with FMG to get on their rail, and that was a tortuous process.”

BC Iron struck a deal that resulted in FMG getting ownership of half the company.

“That was a tough negotiation.

“I got pilloried at the time, but we had no choice, it was not viable to truck the ore.”

He says FMG became a good partner, allowing BC Iron to become an iron ore exporter, generating good profits and paying dividends to its shareholders.

“We paid quite sizeable dividends at BC Iron and then the market collapsed; such is life,” he says.

Nose in, fingers out

Mr Kiernan credits Mike Young with coining a phrase that describes his approach as a company director. He calls it NIFO – nose in, fingers out.

“I do like to get involved, but a director who gets too involved will annoy management no end,” he says.

“It’s a judgement call and it’s something the chairman needs to pick up quickly.

“It’s a difficult thing but you can pick it up with experience.”

He highlights the importance of directors and management working constructively together.

“Some people have said the most important thing for a non-executive director is to know what questions to ask,” he says.

“I say if you go on the board with that mentality, you are going in as an auditor or a policeman and that’s not your job.

“You are part of the process – at a different level from management but you are part of the process.”

Mr Kiernan says management should be able to tap into the expertise of non-executive directors.

“People underestimate the importance of having a good working board that can contribute,” he says.

“A lot of directors have experience and skill.

“Why not let management use them?

“I’ve pushed very hard to create an environment where management can go to directors with skills in a certain area.

“Management needs to be able to talk to individual directors on their area of expertise without fear or favour.

“Equally important is that I need people on boards who can advise me.

“I’m not a geologist and I’m not an economist and I’m not a metallurgist.”

Pilbara Minerals

Shortly after the iron ore market collapsed and BC Iron wound down its Nullagine operations, Mr Kiernan joined the board of Pilbara Minerals.

That was in 2016 and company founders John Young and Neil Biddle were looking to transition out.

“They were smart enough to know, ‘hey, we are exploration geologists, we need to transition this company’,” Mr Kiernan says.

They brought in chief executive Ken Brinsden, who previously ran iron ore miner Atlas Iron.

He approached Mr Kiernan, and together they assembled a new board to help Pilbara develop its Pilgangoora lithium project.

The board members included Nick Cernotta, formerly of FMG.

“That goes back to my philosophy about wanting people on boards who can advise me,” he says.

“He had actually operated a business and built a mine.”

Another recent example was the recruitment of Miriam Stanborough to Pilbara’s board.

“I wanted her specifically for her skills; a chemical engineer who understands processing,” he says.

One of the biggest challenges Pilbara faced early on was securing finance for its project.

Having built and commissioned its project, Pilbara then needed to respond to the sharp slump in the lithium market.

It chose to “moderate” production rather than shut down, as Mr Brinsden wanted to keep good people and knowledge of the ore body.

“That’s when boards have got to work with management, not shit on them, not kill them,” he says bluntly.

“Don’t blame them, just work with them, and get the right balance of optimism and realism.

“Management quite often tends to be a bit more optimistic; boards tend to be more conservative.”

Altura deal

Pilbara survived the tough market downturn and came out the other side stronger than ever.

It refinanced its debt during 2020 and bought the operations of failed competitor, Altura Mining, which owned the neighbouring tenements.

It was a contentious purchase, with the Altura directors – who had spent the better part of a year trying to refinance their debts – claiming they were blindsided.

“They thought we were being opportunistic and, in a way, we were, but what did we do wrong?” he says.

“The receiver went through a process and we bought it off them.

“They had the issue with the bondholders, not me.

“They had a balance sheet problem and I didn’t cause that.

“I can understand them being pissed off.”

Mr Kiernan said the Altura deal was not universally welcomed.

“I had shareholders ringing me up and telling me I paid too much for it.”

However, the market welcomed the deal, with Pilbara’s share price rising from about 40 cents when the deal was announced (in October 2020) to $2 currently.

The main driver has been the strong recovery in spodumene (lithium) prices, helped by the synergies from bringing Altura into its operations.

On being decisive

Reflecting on his career, Mr Kiernan expresses frustration at the inability of some directors to make decisions.

“I’ve had boards where some of the directors have been a bit antsy, not being prepared to take accountability,” he says.

This has included instance where boards have been assessing potential transactions.

“Some directors just want to keep going and going and going with scenario B, C, D, E, F, G, H, I, J, K,” he says.

“There comes a time when you just have to make a call.

“I’m a great believer in saying to boards, do you believe you have enough information to make an informed decision.

“It’s generally a judgement call as to when.

“If your decision is to not make a decision, just tell me.

“You have to move on, I get a bit ballsy at times.”

Golden opportunity

While Pilbara was confronting the downturn in the lithium market during 2018, Mr Kiernan became chair of fast-growing Saracen Mineral Holdings.

Led by managing director Raleigh Finlayson, Saracen had expanded through a mix of acquisitions and organic growth.

“Saracen had a reasonably aggressive approach to business development but it was very disciplined, geologically and financially,” he says.

A game changer for Saracen was the $1.1 billion purchase of a 50 per cent stake in Kalgoorlie’s Super Pit in 2019.

Mr Kiernan describes this as a terrific deal and one that highlighted the unsung contribution of finance teams.

Saracen’s bid had to be unconditional, which meant it had to line up large debt and equity raisings.

“People often underestimate the value of a chief financial officer.

“They think they are just an accountant, no they are not,” he says.

The Super Pit deal was followed a year later by a merger with fellow WA gold miner Northern Star Resources.

That was a sensible thing to do, Mr Kiernan says, as Northern Star had bought the remaining 50 per cent of the Super Pit. It also came with challenges.

“It was a good merger and it has been implemented well,” he says.

“But those things are never easy.

“You are putting two operating businesses together and you are putting two sets of egos together, and two cultures.

“They had good cultures but they were different – Northern Star was far more aggressive, we were more considered.”

Mr Kiernan says he did not want to become chair after executive chairman Bill Beament decided to step down.

“When Bill departed, I didn’t put my hand up,” he says.

Instead, the company surprised the market by recruiting Wesfarmers chairman Michael Chaney as its chair.

Mr Kiernan became lead independent director at Northern Star but will retire from the company’s board next month.

“Michael and I had a bit of a chat and he asked me what I wanted to do,” he says.

“I said I love the company but I’m probably a bit ambivalent.

“It’s a large board, a great board, but sometimes you lose a little bit of relevance, as much as the chairman tries to keep you involved.”

The next chapter

At the age of 71, Mr Kiernan would be entitled to wind down his board portfolio but instead has joined small explorer Redbank Copper as chair.

“You’re going to ask me, like a lot of people, why have you gone back to the junior space,” he says.

“Good question.”

The attraction, he says, comes from a technical assessment of Redbank’s project. “I thought maybe its got a chance,” he says.

“I like the technical side of what they are doing.”

Redbank is in addition to his continuing role as chair of private technology company PhosEnergy (which counts Tim Goyder as a major shareholder) and the Fiona Wood Foundation.

And, of course, Pilbara Minerals.

“If you are on too many boards, you probably don’t understand the companies very well,” he says.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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