Cascade Coal’s A-list of investors PUBLISHED: 06 Dec 2012 00:05:38 | UPDATED: 06 Dec 2012 13:46:26
Corporate raider Ron Brierley is among the group of wealthy investors that invested $28?million in Cascade Coal. Photo: Phil Doyle
Jamie Freed
Legendary corporate raider Ron Brierley, mining identity Peter “Talky” Newton and his Monaco-based friend Bobby Pittorino are among the wealthy investors who poured $28?million into Cascade Coal.
Other prominent investors include property developer Denis O’Neil, his son Ned and car dealer Neville Crichton. How Cascade Coal obtained an exploration licence in the Hunter Valley is the subject of an investigation by the NSW Independent Commission Against Corruption.
The Australian Financial Review has obtained the full list of investors, which reads like a who’s who from Sydney’s monied eastern suburbs. They all purchased shares from the company in November, 2010, in a sale led by veteran stockbrokers Brent Potts and Peter Gray.
Days later, Cascade agreed to sell itself to White Energy for $500 million. The deal, which was never completed, would have delivered a 25.5 per cent return for Cascade’s new investors.
Now, they own shares in a private exploration company with an uncertain future. The inquiry into possible corrupt conduct by Cascade directors could make it difficult to sell the company or convert the exploration licence into a mining lease.
One of the investors, resources advisor Wayne Seabrook of Ironstone Capital, said he never expected to find his investment in this position.
Disappointing investment
“It has proven at this stage to be disappointing,” he said.
ICAC has heard allegations that Cascade directors might have tried to mislead the NSW government by concealing the involvement of former state resources minister Eddie Obeid and his family in dealings surrounding the company’s Mt Penny coal project near Bylong.
Lawyers representing Mr O’Neil’s company, Addenbrooke, have been given permission to appear before the inquiry and could seek to question witnesses about the circumstances surrounding the share sale.
The November group of investors initially bought a 7.23 per cent stake. Their holding was diluted earlier this year when Japanese group Nichi Gas bought shares in a new share issue.
A draft document setting out the terms of the 2010 capital raising said the money would be applied to “reduce third-party debt and creditors”.
By that time, it had been well publicised that Mr Obeid and his associates owned the land under Cascade’s Mt Penny coal licence.
investors Not told of Obeid interest
Sources have said the group of new investors was not told Mr Obeid and his associates also owned a 25?per cent stake in an unincorporated mining joint venture with Cascade until shortly before the share sale was conducted in 2010.
The Obeid group was removed from the Cascade register through a transaction organised by investment banker Richard Poole of Arthur Phillip. He used a private company as an intermediary to transfer funds to the Obeid interests. That was then classed as a “third party debt”.
After Cascade’s attempt to sell itself to White Energy failed, Mr?Poole’s private company, Coal and Minerals Group, was unable to make other payments that had been agreed.
That means Mr Obeid’s group now has security over a 9.3 per cent stake in Cascade, effectively making it an investor alongside the group mainly hailing from Sydney’s eastern suburbs.
The O’Neils’ company, Addenbrooke, which has proposed to redevelop the Rose Bay Marina, held the largest stake of the group, holding its stake in Cascade through a nominee company, Lost Ark. Addenbrooke had invested $8 million as part of the $28 million raising. The second largest investor was a group including Mr?Crichton, which tipped in $5 million.
Mr Newton and Mr Pittorino, who sold gold group Hill 50 to South African giant Harmony Gold a decade ago, were also part of the same group. Mr Newton is a director of the rugby league team the Roosters, based in Sydney’s eastern suburbs.
Family investments
Other participants included the children of Cascade investor and one-time director Travers Duncan, who at the time was also the chairman of White Energy.
Mr Duncan’s daughter Andromeda, the business development counsel of White Energy, invested $1 million in the placement.
On the draft equity raising documents, Mr Duncan is listed as a “consultant” to Cascade who is “directly involved in the day to day operations of the company”.
That is despite him having resigned from the Cascade board more than a year earlier, shortly after it was clear it had secured the Mt Penny project through a NSW government tender now the subject of the ICAC inquiry.
Mr Duncan is due to appear before the inquiry today, as is James McGuigan, an executive at Cascade.
Other investors in the $28 million raising included stockbrokers Richard Granger and Rex Adams, who now work alongside Mr Potts and Mr Gray at Blue Ocean Equities.
Mr Potts is a 40-year veteran of stockbroking and corporate advisory.
Mr Seabrook and Simon Keyser of Ironstone Capital also tipped in funds, along with Nanuk Asset Management investment committee member Ivan Wheen.
“I’m sure a lot of them would be pretty upset they had put in money at a reasonable valuation,” one market source said of their investment, which was based on Cascade’s equity being valued at $387 million.
The price of thermal coal has plunged and mining costs have continued to rise since the investment was made two years ago, and even without the complication of the ICAC inquiry it is possible the value of Cascade’s Mt Penny deposit might have decreased significantly.
Possible class action
On Tuesday, Freehills partner Philip Podzebenko, who had advised White Energy on the Cascade transaction, said there were concerns at the time over a possible class action if it was proven the exploration licence for Mt Penny had been granted under improper circumstances.
At the time, White Energy independent director Graham Cubbin had made inquiries with Cascade directors as to the involvement of Mr Obeid and his associates. On Monday, Mr?Cubbin told the inquiry he would have been “shocked and incredibly worried” if he had known their involvement extended beyond the land they owned in the region.
White Energy abandoned the Cascade takeover in April 2011. John McGuigan and John Atkinson have since resigned as directors of White Energy but remain directors of Cascade Coal. Mr Duncan, John Kinghorn and Brian Flannery, all of whom are investors in Cascade, remain directors of White Energy.
Mr Atkinson, Mr Flannery and Mr?Kinghorn are due to appear before the inquiry tomorrow.
MORE ON THE CASCADE INQUIRY
¦ All in with the Obeids
¦ Cascade had access to rival’s confidential bid: ICAC
¦ Jamie Freed | The obvious lesson in the Cascade case for directors and their advisers is to assume every transaction could be aired in front of the media, the ICAC or a court and to act accordingly.
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