Hogsback and the man who isn't there (again) today

NOT many people known to Hogsback can say they’ve created $5 billion in 10 years. Ken Talbot could, if he was alive. Sadly, the man behind Macarthur Coal, the Queensland miner which this week accepted a $16-a-share takeover bid, will not see its final days.

Tim Treadgold

Talbot, who died last year in an African aircraft accident, was the brains behind Macarthur, a business which has only just celebrated its tenth anniversary on the Australian stock market.

From a standing start on July 5, 2001, Macarthur rocketed through the ranks of corporate Australia to snatch a top 50 spot, and will probably make its formal exit as the 44th biggest ASX-listed stock, assuming a rival does not top the recommended bid from a joint venture of Peabody Energy and ArcelorMittal.

Waiting in the wings, but not yet showing their hands, is China’s CITIC, which could move to protect its 23.4% stake in Macarthur, and South Africa’s Anglo American, which might make a move – or might just as easily play the role of bridesmaid, one that it does well.

Interesting as the corporate games are, and delighted as Macarthur shareholders should be, the real heroes of the game are the man who isn’t there, and the product in which he had faith which so few others shared; pulverised coal for use in making steel.

Hogsback, who first met Talbot shortly after Macarthur listed, was among those who struggled to understand why he was so excited about his two pet topics, pulverised coal and pubs.

Back around 2002 coal was not the sexy stuff it is today. Prices were flat, as they were for the other key raw material in steel production.

What Talbot could see, as a true entrepreneur, was China and the effect it was starting to have on demand for resources of every imaginable sort. He could also see that the big bucks in coal came from the metallurgical variety, which has always commanded a premium over its electricity-generating cousin.

Accordingly, that first meeting with Talbot was pretty much a non-event with most of the talk about pubs and beer – which is probably why The Hog is still pecking at a keyboard and Talbot went on to become a billionaire, or close to it.

The rise of Macarthur, accompanied by Talbot quitting his pub interests, led to the point where it has become a takeover target for some of the biggest coal and steel producers in the world – an astonishing achievement in such a short time.

Pointless as it is to speculate about what might have happened if Talbot had lived beyond his 59 years, there is little doubt that he would today be in the thick of the takeover action swirling inside the coal industry.

That he is not can be attributed to two errors, neither understandable to an outsider, but errors which cost him the place in history that he deserves along with three cheers from Macarthur shareholders, because it was his vision that is making them rich today.

The first big blooper was making cash payments to a politician who had viciously attacked him under the cloak of Parliamentary privilege. Gordon Nuttall, the Queensland politician, copped a jail term for getting the money. Talbot was scheduled to have his day in court, but never seemed particularly worried about what might happen.

The second big blooper (which negated the possible consequences of the first) was to agree to fly in a small plane unsuited to the job of dodging African thunderstorms.

That mistake, made while attempting to visit the iron ore assets of Sundance Resources, is the one which particularly annoyed Hogsback because safety appears to have taken a back seat in a region of the world where it must always be the first consideration.

Which leads back to the key point of what’s about to happen with Macarthur Coal now that the directors have recommended Peabody/Arcelor’s $16 bid, a decision which means Macarthur will disappear, with the only unknown being whether the current bidders win or a rival tops their price.

For that pleasant, profit-making situation to arrive, Macarthur shareholders should thank Talbot, a man with a vision that few shared in 2001, but who got it right, only to disappear before getting the credit he deserved.