Hogsback on the return of the $55 million man

WELCOME back Nathan, all is forgiven! That is not something anyone has said yet but Hogsback can think of $55 million reasons why Nathan Tinkler’s latest adventure in Australian coal is a boost for the industry – and a personal triumph.

Staff Reporter

The money, $22 million of which belongs to Nathan, is the “paper” value created over the past five days by the rise in stock-market value of Australian Pacific Coal the company in which he is the biggest shareholder and its new chief executive.

Before wondering whether The Hog has gone bonkers consider the financial effect of Nathan’s appointment at APC.

Five days ago the company was a true penny dreadful with its shares trading at half-a-cent, and lower.

As news of Nathan’s appointment and plans to use APC as his comeback company the share price started to move, with an initial rise just before the official announcement of his appointment from 0.05c to 0.07c.

At first glance that 0.02c rise (or two tenths of a cent) doesn’t sound a lot, but it is actually a 40% rise, and it’s a long time since any coal stock delivered that sort of upward move and even if APC’s rise was off a very low base a big win is just that, a big win.

But wait, as the man peddling steak knives used to say, there’s more, much more.

Once Nathan’s new job became more widely known there was a stampede into the stock, driving the price up to a 12-month high on Wednesday of 2.1c, before settling back to around 1.8c.

Now you start to get the picture. Over the past few days the share price of APC has risen by more than 250% -- but still there’s more because the real magic of what’s happening is that APC has more than four billion (yes, billion) shares on issue.

The exact number of 4,261,005,514.

Time to break out the steam-powered calculator (and what else should be used when working out coal-associated numbers) because the huge number of shares on issue has a dramatic effect on the market value of a company.

In the case of APC those 4.26 billion shares and a share price of half-a-cent of a few days ago meant the company was valued at around $21.3 million.

At around 1.8c, the last price seen by The Hog, APC was worth $76.6 million, a rise in value over five trading days of around $55 million.

Nathan’s $22 million reward for putting APC back in the news comes from his 40% stake in the stock which is infinitely more valuable than the $500,000 annual fee he has negotiated for managing the company, or his $200,000 signing on bonus.

What next?

Having made a quiet entrance at APC earlier this year when he agreed to become involved in the company and tipped a portion of his savings into the business the challenge now is to make it perform, and that will not be easy.

The man himself acknowledges how hard the job ahead will be, partly because coal remains a tough gig, but also because it is the first time he has taken the title of chief executive, preferring in the past to just be a big shareholder while leaving the day-to-day decisions to executives he appointed, not always with great success.

Speaking to Fairfax Media two days ago Nathan said that APC was obviously a “counter-cyclical” investment based on a belief that the coal price would eventually recover.

“Metallurgical coal prices are in the doldrums and investment sentiment in coal is generally suffering,” he said.

“The only joy that’s going to come from the coal sector in the next couple of years is in cost reductions and also the exchange rate. I don’t see any near-term turnaround in coal prices.”

So, what does he plan to do at APC which might add value to the company?

The quick answer is develop the greenfield projects which are sitting on APC’s books, focusing on the Hillalong project in the heart of the Bowen Basin and immediately adjacent to a former Rio Tinto project which it allowed to lapse with control passing to APC.

Hillalong should be enough to keep Nathan and his team busy for some time, but if not there is a long list of coal assets across Queensland which will generate enough work for everyone.

The real point from The Hog’ viewpoint is that the combination of APC’s assets in the ground with Nathan’s aggressive and deal-making style is a boost for Australian coal – no matter what happened in the past.

Welcome back, Nathan, not everyone loves you but you certainly know how to make things happen.