Twiggy (8 page)

After listening to all the evidence, Magistrate Bob Lawrence decided Forrest had acted “unethically,
immorally and at any cost” to secure ownership of the Central Bore tenements on behalf of Anaconda. He also found Forrest had provoked Salter into punching him, describing the Anaconda chief as unconvincing and a “most unreliable witness”. Forrest, who wasn’t represented by a lawyer in court, described the proceedings as unjust and unfair. In years to come, this became his standard response whenever
a court didn’t believe him.

Undaunted by his growing band of detractors, Forrest maintained a hectic pace and punishing travel schedule as Anaconda chief executive. He knew the company would need a lot more money than it had raised in the float if it was to realise its lofty ambitions. Forrest hired Peter Matheson, an engineer with vast experience working on the Greenvale nickel laterite
project near Townsville. The pair toured the world, speaking to people with experience in high-pressure acid leaching and to companies who might stump up some money. In a big breakthrough in 1996, Forrest used his persuasive skills to convince the secretive Swiss commodities trader Glencore to invest $US220 million for a 40 per cent stake in the Murrin Murrin project.

The deal with Glencore
appeared to be a masterstroke: Anaconda, a minnow on the global stage, would build Murrin Murrin in a joint venture with one of the world’s biggest companies. As part of the agreement, Glencore would also market the nickel produced at Murrin Murrin. It was also a handy deal for Forrest personally: he earned a $1-million success fee for negotiating it, on top of his $380,000 annual salary. When
asked by journalists why he was entitled to such a huge fee, Forrest snapped that he would gladly give up the money for the chance he’d lost to spend time with his two small children, after the birth of his second daughter, Sophia, the previous year. “If someone else could have achieved what has been achieved by the team, without me having to pay the monstrous penalty of not knowing my own children,
because I have been totally dedicated to this company and the project, then I would have gladly paid for someone else,” he said. “I see the bonus certainly as a sign of thanks, but it’s not compensation for not seeing your children grow up.”

The extra $1 million would have helped pay the mortgage on Forrest’s charming new house in Marmion Street, Cottesloe. The five-bedroom, three-bathroom
pile, known as Burradoo, sprawled over more than 900 square metres of prime land near Perth’s famous Cottesloe Beach. It was a far cry from the shared housing of Forrest’s stockbroking days in Perth. He had returned home in style.

But any joy over the Glencore investment or the $1-million bonus soon evaporated when the Swiss company threatened to cut off its critical funding to Anaconda unless
it could lift its 40 per cent stake in Murrin Murrin to at least 80 per cent. Forrest feared he was being squeezed out of the company he had built from scratch. “That was one of the toughest times of all of our lives involved in the company,” he later recalled. Forrest realised he was now playing in the big league and would need to fight to avoid giving away control of Anaconda to Glencore,
which had also accumulated about 20 per cent of the shares in the company. He was faced with a choice of selling out or rolling the dice for one last shot at survival.

True to form, he rolled the dice. In 2007, Forrest borrowed Glencore’s corporate jet and flew to North America to raise $US420 million in debt from US capital markets. This erased Anaconda’s short-term funding concerns and
allowed construction of Murrin Murrin to begin. Forrest and his finance team had survived on a few hours’ sleep for days on end to secure the debt. And like most things Forrest did, the deal ripped up the rule book. Never before had a large-scale greenfields mining project been financed by the capital markets rather than traditional bank debt. The junk bonds were interest only, which meant Anaconda
would not need to repay the principal until Murrin Murrin started generating cash flow. As the
Australian
’s John McIlwraith pointed out, Forrest was making a habit of overcoming seemingly insuperable obstacles and raising money at a time when “some companies have trouble financing a new car park”. Forrest attributed his Midas touch to being able to sell his vision face-to-face with the US financiers
rather than dealing with a bank’s lawyers and other middlemen – proof yet again that he could sell almost anything if he could just get his foot in the door.

Forrest’s next fundraising mission was to London, where he took the brazen step of cold-calling Glencore’s controversial founder, Marc Rich. It wasn’t the first time Forrest had done business with a morally dubious character, and it
wouldn’t be the last. The cigar-chomping Rich had fled to Switzerland in 1983 after being charged in the United States for tax evasion, fraud and illegal trading with Iran. He had then set up his own trading business in direct competition with Glencore. Rich was a ruthless businessman who made a billion-dollar fortune doing deals with unsavoury regimes, including those of Augusto Pinochet’s Chile,
Nicolae Ceauşescu’s Romania, Fidel Castro’s Cuba and apartheid-era South Africa. He later admitted to bribing officials in countries such as Nigeria and to helping the Israeli spy agency Mossad. Rich was pardoned, in somewhat murky circumstances, by Bill Clinton on the US president’s final day in office in 2001. But in 1998, when he met Forrest, the 63-year-old Rich was still on the FBI’s “ten
most wanted” fugitives list. Forrest was able to convince Rich to buy a 6 per cent stake in Anaconda, a move that infuriated Glencore and tempered its influence on the share register.

Back in Perth, Forrest’s approach as chief executive was often highly unconventional. Before he had even raised the money from US capital markets, he began ordering the most expensive equipment Anaconda would
need for the project. These included the 37-metre-long, five-metre-high autoclaves that were made by the Australian Submarine Corporation in Adelaide and trucked across the Nullarbor. Working capital was tight, so Forrest launched a competition for Anaconda staff to come up with their best cost-saving measures. One employee won a trip to Hamilton Island for suggesting that some filters be removed
from the plant – a move that saved millions of dollars at the time but inevitably came back to haunt the plant’s engineers. Another won a Harley Davidson motorbike for a similar idea. “They were all harebrained ideas and they all came back to bite Andrew,” says a former executive.

Forrest’s proclivity for living on the edge was balanced by an emerging ability to inspire intense loyalty in
those working under him. This would come to be one of his foremost traits as a chief executive. Forrest was growing more confident in his own abilities as a leader and had finally lost the stutter that was still noticeable even in his early thirties. His work ethic was phenomenal. “As a CEO there’s nobody I’ve worked with who has his energy and his enthusiasm and drive,” says one veteran mining
executive who worked under Forrest at Anaconda. “He would work 24-7, he expected you to do the same and he never took no for an answer.” Michael Masterman, Anaconda’s chief financial officer, was so loyal to Forrest’s Anaconda vision that that he gave his baby son Isaac the middle name “Murrin”.

By 1998, however, construction work at Murrin Murrin had started to fall behind schedule and serious
technical problems were emerging. Forrest had signed a $1-billion fixed-price contract for the construction of the project with engineering firm Fluor Daniel – a deal that would ultimately prove his undoing. Experienced hands in the mining industry knew that fixed-price (or lump-sum) contracts were potentially disastrous because the project owner must cede control during construction. The contract
for Murrin Murrin put the onus on Fluor, working closely with technical consultants Sherritt International, to effectively guarantee that the plant’s HPAL technology would work. Any cost overruns would have to be borne by Fluor. That appeared to be a victory for Anaconda shareholders, but in reality it helped create a debacle that would ultimately lead to Forrest being ousted as chief executive.

Forrest has always claimed he had no choice but to sign the $1-billion fixed-price contract with Fluor because Glencore and the US bondholders had insisted on it as a condition of providing funding to a relative unknown in the mining industry. “We argued with Glencore and the investment banks acting for the bondholders that a lump-sum contract gave Fluor the willingness to try and cut costs
from that lump sum and any cost they cut became Fluor profit,” he said. “We argued that it was better for them that they left control of the construction and commissioning of that plant with management who had only one incentive and that’s to make it work at the best result for shareholders.”

Forrest’s version of events is disputed by several insiders at Anaconda who say the chief executive
was warned against a fixed-price contract. In fact, one former employee even suggests it was Forrest’s exuberant brand of salesmanship that may have given the bondholders the idea to insist on such a contract in the first place.

Whatever the truth, the Fluor contract turned out to be a catastrophe for everyone involved, especially the US bondholders, who lost most of their money. Fluor couldn’t
deliver the plant on time and Anaconda began running out of funds. By 1999, whispers about commissioning problems at Murrin Murrin had begun to spread like wildfire through the market. The main rumours centred on problems with the giant autoclaves – the heart and lungs of the plant, through which the ore was digested in a slurry of sulphuric acid. But Forrest was having none of the gossip.
He told the
Sydney Morning Herald
in February 1999: “The autoclaves are performing very, very reliably.” What he didn’t say, however, was that the autoclaves’ flash vessels, where the acid-rich slurry was discharged, were barely working at all. When the share price collapsed 14 per cent in a single day in March 1999, the finance pages screamed that Anaconda had fallen into an “acid bath”. Forrest
came out swinging. He told the
Age
that although the flash vessels were not working, rumours of serious commissioning problems were groundless.

Forrest had been making forecasts of production from Murrin Murrin that were not met. Years later, Forrest would admit that the plant was seriously flawed from the start. Key equipment meant to last six months at a time, he revealed, was lasting for
just six seconds.

Forrest’s defining strength, then and now, is an ability to overcome hurdles that would sink most other people. Despite the diminishing market confidence in Anaconda, he was able to persuade the prime minister, John Howard, to officially open Murrin Murrin in July 1999. Howard had agreed to attend the opening because he liked Forrest, an inveterate networker who would also
become close to Howard’s successor, Kevin Rudd. “I’ve met a lot of managing directors,” Howard said. “But I don’t think I’ve met a more self-evidently enthusiastic and dedicated managing director than … Andrew Forrest.”

The formal opening was highly unusual because the Murrin Murrin plant wasn’t even close to working properly. Thousands of workers had toiled on the site, in temperatures
often above 45 degrees in summer, to build a project that was plagued by fatal flaws. The plant was almost incapable of producing anything at the time of the opening, says former Anaconda employee Wayne Richards. “Andrew was ringing me up saying, ‘What time are the briquettes coming out of the furnace? Don’t let me down, mate, don’t make a fool of me,’” Richards recalls. “The briquettes only came
out for two hours and then the furnace shut down. But we just hung it together for the grand opening.” In fact, it would be another eleven years, with Forrest long gone and Glencore fully in charge, before Murrin Murrin would operate at its design capacity. But to those who turned up to the opening in 1999, the enormous chemical factory was impressive and imposing. With more than 3000 tonnes of structural
steel rising from the desert haze, it looked like a set from a
Mad Max
movie.

The Murrin Murrin opening was also remarkable because Forrest, wiping tears from his eyes, used the occasion to lead the 300 invited guests in a lengthy and solemn prayer session. The devout Christian would later install a chapel at the remote mine site to cater for the spiritual needs of his workforce. Once prayers
were out of the way, Forrest put a brave spin on the behind-the-scenes dramas. He told the audience that Fluor should be “thanked and congratulated” for its work as the construction contractor, extolling the company for “completing” the project only two years after work had begun. That would be the last time he would ever publicly praise Fluor. Just two months later, Anaconda sued the company
for $1.6 billion over the construction delays and design faults. Fluor was reportedly forced to pay a fraction of this amount as part of a confidential settlement to end the claim.

In an unusual display of vulnerability, Forrest admitted that the “nightmares” of the previous two years were still haunting him. “Certainly there have been times when many believed that we would not actually get
to today, and at times I shared that belief,” he said at the opening. Yet despite his mounting woes, the irrepressible Forrest was still dreaming of bigger plans for Murrin Murrin. He told the audience he wanted to spend another $1 billion expanding the plant to boost production capacity by a staggering 150 per cent. By the time that was completed – as it would undoubtedly be
,
in Forrest’s opinion
– Anaconda would be the world’s second-biggest nickel producer and Murrin Murrin one of the biggest mining projects in Australian history.

Warming to the task, Forrest also took a swipe at those journalists who had run stories questioning his Anaconda dream. “Where companies and individuals strive to achieve, whether in great adversity or not, they should be supported by the community, including
the media,” he said. “When they succeed they deserve applause. If not, they should be encouraged to try again, not vilified as a failure. It is the fear of failure, rather than the excitement of success, that drives too many of us these days, and it is this fear of failure that our press dwells on too much.”