Insight - Coal dust: creditors eye Australian magnate's fragile fortune

Sun Oct 14, 2012 2:36pm EDT
 
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By Jane Wardell and Narayanan Somasundaram and Saeed Azhar

SYDNEY/SINGAPORE (Reuters) - Nathan Tinkler became Australia's youngest billionaire with a well-timed investment in mining.

But as China's slowing economic growth cuts demand for iron ore and coal, Tinkler's rise from obscure electrician to mining magnate, sports club owner and champion of a rejuvenated Australian industrial town could be unraveling.

Creditors are circling Tinkler, 36, who turned a A$1 million bet on an Australian coal deposit into a billion dollar fortune.

At least three companies within his stable of some 50 firms are being sued for about A$200 million ($205.5 million) in total, including for missed payments, according to court documents. In a bid to raise funds, hundreds of his racehorses will be sold at auction this month.

Tinkler's ability to pull off big deals means not everyone bets his difficulties will spell the end to his fortune. But his fate is being watched by investors who see his travails as a cautionary tale. Tens of billions of dollars sunk into Australia to build mines, ports and rail lines are hanging in the balance as China's hunger for resources falters.

"Mr. Tinkler was perhaps luckier than some. He was able to pull off two very good deals when the whole global economy was going down. Now that coal prices have deflated, that has exposed the risks to those highly leveraged deals," said Matthew Trivett, an analyst at Patersons Securities in Brisbane.

Benchmark prices for iron ore and coal, Australia's largest export earners, have fallen about a third in the past year as China slows. Miners including BHP Billiton, Rio Tinto and Xstrata have shelved expansion plans and cut production.

At risk is Tinkler's 21.4 percent stake in Australia's biggest independent coal company, Whitehaven Coal, which represents the bulk of his wealth. The value of his stake, worth about A$1.2 billion at its peak, has shrunk to less than A$700 million.   Continued...

 
General view of property Australian mining magnate Nathan Tinkler is renting in Singapore October 2, 2012. As China's slowing economic growth cuts demand for iron ore and coal, Tinkler's rise from obscure electrician to mining magnate, sports club owner and champion of a rejuvenated Australian industrial town could be unravelling. REUTERS/Tim Chong