The Unbelievable Story of how Fortescue Beat the Odds

Episode Transcript
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(00:00):
Forest is pushed out of the company by the major
shareholders, bondholders saw a return of $0.25 on the dollar.
Twiggy becomes the richest person in Australia and it was
less than four years from the 1st hole to the first or in
commercial production good to go.

(00:20):
In the space of 20 years, JD Fortescue went from being a
shell company to being worth over $100 billion in paying out
more than 42 billion in dividends.
It's truly the greatest story ofwealth creation in Australia.
And as a result of that, we're so curious about the history
here. You're curious about the history

(00:41):
and you're going to go deep intothe story, the making of the
early years of Fortescue. What?
What a story right there. There is no shortage of, of
controversy, of excitement, of, of tales, of ups and downs
throughout the whole story. And I thought it was just a tale
worth telling, don't you reckon?Worth telling absolutely

(01:02):
strangely, like it kind of kind of it happened before us like
this, this, this tremendous, youknow, value creation story of,
of, of Fortescue. But you know, it was always kind
of like something that we're curious about.
But admittedly, I've never really done the homework to, to
know all of the nooks and crannies and details.
But this, this one's a roller coaster.
It intertwines with the most fascinating time in commodity

(01:24):
markets, in Australian commoditymarkets history and global
commodity markets history. This is the it's also a story of
the emergence of China and how that just upended the Aussie
mining business after quite honestly decades of kind of
dismal performance of downward trending commodity prices.
And boy, was everyone in for a sharp turn around.

(01:44):
It's a story of entrepreneurship, you know,
stewarded by none other than, you know, Andrew Twiggy Forrest,
who is is an Australian icon andgets his fair share of attention
as a as a result of that. But.
Fair share attention. But the force of nature that
that he is, is is the, you know,is is, is intertwined and always

(02:06):
will be with Fortescue. Yeah, the characters are massive
here. Yeah.
And and we're going to focus on the first five years of the
story here. This is 2003 to 2008, and it's,
you know, it's an eventful pact in five years like, like none
other. So let's RIP in now.
Tell me where things start off. Because Twiggy.
Twiggy had he, he had a, he had a a preamble before Fortescue.

(02:29):
He he did, you know, some might call him the the the
stockbroker. To Alan Bond, there was a whole
history in in broking, but I'll I'll start the story with
Anaconda because that was his first go at running a mining
business and it was set the sortof scene for the the kind of
form or the the standing that Twiggy was in pre FMG.
So he ran the business from the mid 1990s to the early 2000s and

(02:52):
Anaconda nickel tried to get theMarin Marin nickel laterite
project up and running. They built the plant, they got
it up and running. It didn't quite hit name plate.
It was, it was a complex journey, but already Forrest's,
his sort of status as a a legendary sort of salesman
across the industry has been cemented through his ability to
to raise capital, to convince people and bring people along

(03:15):
with the journey and to try their hand at developing a
project that was very unique in the Australian landscape.
The the technology itself was nascent, right?
We talked about the way that H pal technologies completely
transformed the the nickel market today with it's it's low
cost application to to Indonesian laws, but my God,
where there's some real teethingissues when it was applied to

(03:36):
the the West Australian laws. Yeah, Yeah.
They, they, they were 30 years early and it was these guys as
well trying to run 45,000 tons per annum of nickel output and a
couple other sort of smaller operations that were coming
online at around the same time to, to finance this thing.
Twiggy did something unique and there was a whole bunch of
unique things beyond just the the HPL processing that was done

(03:59):
to try and get this project off the ground.
He went to the US bond market, raised US $420 million, brought
in the likes of Glencore, who took a big stake in the project
as well as in the company Anaconda Nickel bought in Mark
Rich separately from Glencore. This is after he had separated
from the company he founded. And then later in the piece,

(04:20):
Anglo American comes in. So the ambition was it was
massive. It was clear as day.
There's this snippet that jumpedout at me reading this newspaper
article. And I think about the year 2000
when Anaconda's in a bit of strife.
And he's asked would he ever sell the business?
And he just, you know, looks thereporter in the eye and says,
how often do you get the chance to establish a major mining

(04:43):
house? So he knew what he wanted to do.
And he didn't quite achieve thatwith with Anaconda, but it sort
of set him on his way. The vision was.
Bold and big even before there was anything.
Yeah, in some sense. And you and you, you see that
with entrepreneurs, right? So the, the persuasiveness as
well, you see it in so many different ways.
Managed to get the Prime Minister John Howard to come and
open the facility at this grand opening.

(05:03):
I think there was 300 odd peoplethere.
The plant barely worked at this point in time.
It's just generous. It's spitting out a bit of Niku
at the end, but there's, you know, there's the flash, there's
the Ritz, there's the the cameras and everything.
But eventually in sort of 2001 type time frame, Forest is

(05:24):
pushed out of the company by themajor shareholders.
At that point in time, they had $800 million in debts.
The bondholders, who at that point had lent US $400 million,
saw a return of $0.25 on the dollar, and Glencore wrote this
down as the biggest loss in their history at that point in
time. So off Twiggy goes into
corporate exile, takes a year away with his family, goes to

(05:46):
Europe. He'd been running this company
for nearly a decade. And how old is he at this point
in time too? At this point in time, he would
have been in his late 30s. Yeah, I believe he was 41 when
he came back in and and started Fortescue, right.
So he walked away with a decent percent, 4.5% of the company
Anaconda who had seen their ups and downs, but it was still

(06:08):
worth a bit of money. And he had a severance package,
but he'd taken on leverage, you know, he borrowed on margin to
buy stock. So things aren't exactly hunky
Dory on his personal finance and.
Yeah. Yeah, he kind of has to to
restart ish from that that pointin time.
And that is the the concise summary of his time in charge of

(06:29):
Anaconda Nickel. With it, you know, when we're
going to get to Fortescue obviously is the next chapter,
but with it, with the people that he like brought together
from a team perspective, that would then emerge in the early
days of of of Fortescue as well.Not, not massively, not like
we've seen in in in other sort of stories there.
There are certainly like reoccurring characters

(06:50):
throughout his sort of broader life, but from a technical
perspective it was a very different project.
It was, you know, Fortescue is much more a logistic type
project, so you didn't see a whole bunch of that when he
comes in. It's not to say that there
weren't lessons, like there wereso many lessons that he learnt
from that time at Anaconda that you're just going to see through

(07:11):
every sort of facet of the Fortescue journey.
Debt. Debt is a big one, but you know,
things like how you build a project who has control
ownership both with the company and the the building of a
project. That's just a couple and we're
going to see plenty more of themas we kind of go through.
Right, not not every miner gets to make that same decision as

(07:34):
Fortescue to bring it all in house that that engineering in
house, delivery in house. In fact, many miners, they,
they've got to rely on proven experts.
And when you're relying on proven experts, you want expert
operators like Axes Mineral Services.
Right axes have been crushing it.
Literally crushing it for years all across the gold fields.
Companies of all different shapes and sizes.

(07:56):
I I seriously don't think there is a mine in the gold fields
that they haven't worked for. Like like mobile crushing or
sorting. That's their bread and butter,
right? And now they've stepped it up.
They've they've joined forces with Robex group unlocking
capability that we haven't seen before in house engineering,
mate, They've got a civil works well.
W force is part of that family. Rum walls, whole roads,

(08:18):
airstrips, axis mineral services, mate, turnkey solution
is what they can offer. And no, I don't use turnkey
lightly. Mate, and you mentioned the
bread and butter as well before.So that's the the crushing
capability and that's where about they're about to change
the game. So axes can now build, own and
operate these semi relocatable crushing circuits.
That means the miners can get rapid mobilization, reliable

(08:39):
tons, no upfront capital, which is what we love mate.
You get a huge CapEx saving by using Axis Mineral Services.
You're saying they can do the whole front end of that plan
without check, without capital check?
That's enormous, mate. So if you're planning a meal
expansion, you're restarting an old plan and you need a front
end that just fits for purpose without the CapEx.
Talk to Axis, they'll come up with a solution for you.

(09:01):
And I know this because they're now bolstered by industry
veteran, the crushing game mate Jason O'Rourke.
In fact, he's never come across a Rocky can't crush.
Give Axis mineral services are cool right now.
OK, so he's taking he's taking ayear off comes back and the
beautiful thing about this industry, mate, you always
reinvent yourself. And I'm sure his reputation was,

(09:22):
you know, was would not have been in a good place after a
massive blow up like like Anaconda.
Yeah, I, I, I think that's safe to say.
You know, you've been a bit cynical.
You could say sort of in in tatters, but it was a very
complex thing that they were trying to do.
And good on him for brushing himself off after a bit of time
away and giving something else acrack.
So mid 2003, earliest 2003 things start coming together.

(09:46):
Iron ore at this point in time is trading at US 30 bucks a ton.
It's not even indexed, not traded remotely transparently at
all. Mark Caruso, who was the guy who
facilitated Twiggy's entry into Allied mining and processing,
which became Fortescue called iron ore sewage ship.
So that just gives you a bit of a flavour for the, the time

(10:07):
we're in. It's not the the ultimate cash
cow that iron ore would become for, for Fortescue and for
Australia. So Allied host this AGM at the
Celtic Club here in West Perth and this this sort of part of
the story I find has a a bit of sort of law to it.
He gives his first presentation,it's the AGM presentation where
they're voting on him getting his big stake in the company.

(10:31):
They are voting on the changing of the name of the business and
all these sorts of things. So it is made in public
presentation and I think it's sort of 13 odd pages.
You can find it in in black and white, big bold letters.
And the ambition is clear as day.
So Fortescue Metal Group is the new name.
It's named after the river that runs through the heart of the
the eastern Pilbara region. And he forecast it from 2003 to

(10:55):
2007. The iron ore market is going to
see demand jump from 480 milliontons per annum to 700 million
tons per annum. Now that is an astounding growth
rate over a a four year period if you can believe it.
And to the supply side of the story, he forecasts that that
cannot be met, that there's going to be an 80 million ton

(11:16):
per annum shortfall in the supply and that is the
opportunity that Fortescue is going to seize upon.
So he's, he's taken his, his, this is an EGM, a company called
Allied. He's renaming or rebranding us.
It's Fortescue or FMG limited. Yeah, flicking out the the gold
that they had focusing in onlineor.
But like, how did, how did, how did he actually manage to get
control of this vehicle in the 1st place?

(11:38):
Like how did all of that how, how did he pop in there?
So the guy I mentioned, Mike Caruso, facilitated this.
He, he, he was sort of running the company.
Yeah, beforehand. And what he kind of does is
Twiggy has this group called theThe Metal Group.
That's his personal company. And in April of that year, 2003,
he'd come to this agreement withCaruso essentially.

(12:02):
And this would be facilitating the acquisition of a bunch of
sort of iron ore interests that the Metal Group had had for
blending purposes in, in quotation marks.
That's all just shareholder justification like we can, we
can sort of see through that right, those those are.
Shooting a tremendous salesman to with.
A vision they, they are parachuting someone in who is a

(12:24):
proven, you know, talent when itcomes to salesmanship.
It's just shareholder justification.
And how it, you know, plays out in a, in a sort of fiscal sense
is Twiggy gets 5 million shares free upfront, gets 5 million
options for free. They are exercisable at $0.08.
Now there's this sort of executive agreement and it's all

(12:45):
subject to shareholder approval.But that that's not it.
There's a heap of options that come in.
And this is famously how he getshis enormous stake in the
project. He gets 100 million options, all
exercisable at $0.08. Now that 100 million is chopped
up into four lots of 25. And the key conditions there are
getting the share price up, getting it up to 10 cents, 15

(13:06):
cents, 20 cents, $0.25. So it's just gonna maintain a
threshold over those levels for I think a 10 day period.
And he gets his stake. So by 2005, he would own about
47% of the company. And that's how that all came
about. And Caruso sort of said to this
point, I had to incentivize the man.

(13:27):
So it it kind of, you know, he also added to that, that Boris
wanted much more than the 110 million shares he ended up
getting. And that was just sort of part
of the negotiation. The market started lapping it up
straight away. I mean, from April through to
July, when that presentation is given the, the, the stock goes
from like $0.10 to mid 20s. It is a super thinly traded

(13:50):
thing. It is, you know, I had a
minuscule market cap. So don't read into that too
much, but that, that is how thatall kind of came about.
And I think it's worth kind of adding a few more thoughts on
that because I think, you know, we've both read a lot of stories
about how, how companies get founded and stuff.
And like, in my mind, this is just the, the West Perth way of
the company kind of getting founded.

(14:11):
This is the the West Perth way of, you know, someone in Silicon
Valley going into their garage and starting a company.
The founder wants to have control of the vehicle.
The company had no value really.The RTO with no no asset either.
So like that's. The yeah, yeah, the value is
being a listed entity. Yeah, that is all of that.
I mean, they claim to have a billion tons of iron ore, which

(14:34):
was just yeah, yeah. It, it wasn't worth the paper.
It was kind of written on in theend.
But that is how these sort of things come about.
And Twiggy got that all for all for free, right?
He, he ended up tipping in a bitmore than $8,000,000 to exercise
the 100 million options. But at that point in time, you
know, he ate, he had generational paper wealth.

(14:56):
Right. But even just like the the
fortuitous nature of like the vision from date out when, you
know, when he comes into the company, it is it's like clear
and salient. It's it's it's probably
contrarian at that point in time, or at least to the extent
that he's forecasting it. And with the passage of time, he
might have even been kind of, you know, underestimating what

(15:16):
the what the dynamics would be in that iron ore market.
But he saw it like, did he? Yeah.
A. 100%, I don't think many people would accuse him of of
underestimating too many things.But you're dead right.
They come out with this vision. They want to build a mine, they
would want to build a 400 kilometre railway, they want to
build a port. They give it a rough thumb sack
and say it's going to cost 2 to $3 billion.
Importantly, they really emphasize that they are going to

(15:38):
be a multi user infrastructure developer.
They are going to build IEA railway that other people can
use. And they constantly go at BHP
for not letting anyone else use their things.
So they name projects here, theyname Hope Downs, which hadn't
been developed at this point in time.
And it's in the same sort of ballpark in the in the kind of
east of the Pilbara there. And they say that is a a project

(16:02):
who would benefit from this shared infrastructure.
And, you know, we're talking about a point in time where Gina
didn't have a mine in the early 2000s here, but that that one
never kind of comes to fruition.But they're, they're trying
different things. They're trying a lot of
different things. It's, it's a, it's kind of crazy
because of that. But they didn't actually have,
they didn't have a project. They didn't have, they didn't

(16:22):
have money. They didn't, you know, there's
nothing, there's nothing there yet.
But, you know, we're going to, we're going to solve the
infrastructure, the mine, the project, the tenements, the, you
know, the, the buyer, all of that without having anything
yet. Yeah, it's a kind of, it's kind
of a. The the first thing they do,
yeah. And the first thing they do to
that point is they build the team.
They they build a great team. They bring in the likes of

(16:45):
Graham Rowley, Alan Watling, Chris Catlow and Phil Kirk
Lechner, all with real experience.
And then they also bring in Russell Scrimshaw, Herb Elliott,
one of the greatest Australian runners of all time, Seb Cohen,
Chris Linegard and Ken Ambrest. A bunch of them sort of fill out
the the board as well as other roles within the business.
So you've got this crazy ambitious leader who's convinced

(17:07):
them all to, to come on this journey against the better
judgement for for a lot of them,they've haunted down experienced
as well as just energetic people, people that are that are
keen and they're filling out thedifferent roles, rail, port,
geology, metallurgy, marketing, finance.
They are, you know, hiring for for specific needs.
They've got a conceptual kind ofgoal and now they're just

(17:27):
getting after it. And that is the plan.
And that's what you see in that kind of ambitious and, and
elegant presentation they put forward in in 2003.
They've also finished that quarter with about 1,000,000
bucks in the bank. So to your point, very, very
small. But you know, the ambition isn't
restrained by the the market size at that point in time.
And they want to start construction by early 2004 on,

(17:50):
on the railway, which is, you know, very, very ambitious to to
say the least. So.
Wow. So obviously BHP like the, the
landscape of iron ore at this point in time, the likes of BHP
and Rio, they've got the good stuff like this really can't be
that you know, much opportunity to actually pick up like

(18:12):
appropriate iron ore. Yeah.
I mean, it's a, it's a super valid question.
One of the elements that had really excited Twiggy and the
rest of the team there is that they caught wind that the majors
had barely done any exploration.They thought they had all the
the good stuff and they had so much of it they didn't feel the
need to. There was also, I'll go into the

(18:33):
geology in more detail in a moment, but there was there was
a lot of sort of thinking in thePilbara and assumed, you know,
knowledge that didn't prove to be all that kind of true that
Fortescue would repeatedly kind of counter and they would try
different things. So, for example, the, the
deposits, they always thought they were these deep, deep
things that would sit close to outcrop that didn't prove to be

(18:57):
true. And they, you know, challenged
that and it, and it came up withthe goods in time.
So looking at the projects they have at this point in time,
you've got Mount Nicholas. That was the, the first real
hope. And that was where Twiggy pulls
out this map. He, he circles around Mount
Nicholas, he draws this snaking line, which is the railway to
the port. And that's the ambition.

(19:18):
That's the 400 kilometer rail line.
And that's where they want to get the ore from.
And then they start testing thatand they realize it's, it's
complete crap. So in what sense the, the, the
deposit? I mean, they, they sort of talk
about the stuff being high 40%, you know, it's riddled with,
with shale. No good.
They look at another project called Mount Lewin and they sort

(19:41):
of hit low grade super gene mineralization there into bedded
again with this sort of thick shale, which is hard to
beneficiate. It's, it's no good, but there
are some pockets of hope in there which which I'll get into
and it kind of gets the, the technical team thinking and
they, you know, like you say, they know the majors, BHB and

(20:01):
Rio have a lot of the good projects, a lot of the good land
tied up. But they just get super
aggressive in pegging tenements everywhere.
They're a bit cheeky as well. They, they chase after BHB in
some cases on tenements that have been kind of under worked
and they, they call that out andthey, they sort of snap them up
as soon as other tenements become free.
They just gobble them up. So they're very aggressive about

(20:24):
picking up as many tenements andjust building that land holding
and they are incredibly aggressive with drilling.
They spend more money on drilling than any other listed
Australian company over that period.
So they just go super hard at that footy from 2003 to about
2005 before they cotton on to what really works.
The and the tenements that wouldultimately come to become their

(20:46):
first project. Like at what point did they
manage to pick them up? I would say they picked them up
late O3 early O four, yeah, whenthey cotton on to what's working
is mid 2004. Yeah, with the story behind how
they picked up those tenements, Have you heard that one before,
do? You have a story to share.
I well, I heard that, you know, this is just one of the, the

(21:08):
biggest oversights of a major BHBHPS like tenure.
They let it drop because there was like, you know, 11
exploration manager or somethingwho was under the pressure to
kind of cut costs and thought these aren't going to be in the,
my plan for 4040 odd years. You know, and all of that is
true, but what's not factored into that is a consideration
for, you know, allowing the possibility of a, of a, of a new

(21:31):
competitor like entering the arena.
It you know it's their own faultfor it.
How good is that? That's so good.
So the thinking in simple terms had been prove up 1,000,000 tons
at roughly 50 million, 50 million tons per annum over 20
years. You can justify the
infrastructure spend that that sort of rule of thumb type

(21:51):
thinking about how they're goingabout this.
They they sign another JV with this group called Cons Min, who
actually owned Woody Woody. And they have the Mindy, Mindy
Project that proves to be a bit of a dead end.
But again, it helps them garner a bit of attention and also
helps the geologists on this sort of journey to to finding
those economic projects. And they just, you know, in that

(22:12):
Chester range part of the world,keep snapping up tenements all,
all along the way. All of this talk about the the
multi user infrastructure like did they did they ever get close
to doing a deal with with Gina? No, I don't think Gina had any
interest in ever doing a deal with them.
So Gina at that point in time was looking to do a deal with

(22:34):
Kumba. So Anglo is backed Kumba, which
is a South African iron oil miner.
And I don't think it ever got close, but Hope Downs needed
rail. They ended up doing that big
deal in in 2005 with Rio Tinto. Although Twiggy did kind of
antagonize Gina by hiring her son John, who worked for the
company for a for a period of time. 2004 odd.

(22:54):
What else sticks out from those early days?
But there's there's one thing that you see from 2003 onwards
and it doesn't stop for a long, long, long, long, long time.
The regulator is on to their case straight away.
They they get more price queriesthan you can possibly imagine.
It seems like every other month there's another price query in
the first instance. Regarding that presentation we

(23:16):
showed earlier, ASIC is asking, you know, why are you using non
dual compliant resources? Does Hancock even know you've
mentioned their name with regards to Hope Downs, where
have you sort of pulled these cost figures, these development
timelines from? Do you have the funding
capability there? There are so many questions they
have about that and you kind of get the picture.
I won't sort of name them throughout the the the story,

(23:38):
but there are so many price queries.
The stock jumps 20, thirty, 40% peels back and there's so much
happening as well that it, you know, it catches the eye of of
ASIC and there's the sort of promotional flavour to it all.
But yeah, that that is a thing that that sticks for for the
majority of the story we're going to talk about today.
Yeah, that, that's an interesting reflection.

(23:59):
I mean, I'm not, I'm not surprised because there's this
big and bold talk that is, you know, far further out than what
seems possible by any stretch ofthe imagination.
But the ability to kind of talk so far ahead enable them to to
maybe attract enough market sizeto eventually get a financing
way. Yeah, yeah.
It's one of the parts of being apublic company.
So, so that kind of takes us to Chapter 2 of of this story in a

(24:23):
way. And it's kind of hard to
determine at at this point in time what what is the most
pressing job. But I think pretty close to
that, you know, top of the list there would be finding a proper
resource. They start working on a whole
bunch of different fronts, but they need to be aggressive on
this punt. So like I said, the tenement
package within sort of nine months within 3/4 that lifts 25

(24:43):
fold. So they're just gobbling up land
left, right and centre. They come out with this scoping
study, which again is crazy to think about because they don't
even have a legitimate project project in terms of the, the
ore. But they talk about 20 million
tons per annum, billion and a half CapEx, 850 million MPV.

(25:03):
You know, that's not going to pass muster, that's not going to
attract anyone. And there's this interesting
sort of conversation that takes place between Alan Watling, who
becomes The Who is it the COO and Andrew Forrest.
So he, he's chatting with Twiggyand he asks the question, what,
what is the size that that sort of gets this up?
And he's sort of he's thinking, oh, maybe 15,000,000 tons per
annum that that is not of sufficient scale.

(25:27):
And you know, that is not interesting to Alan, let alone
sort of Twiggy here. But Alan goes on to say if you
could do 30 million tons per annum, maybe that's kind of
doable. And of course, Twiggy just jumps
at that opportunity. His eyes kind of light up.
So they've got a target and in short order that actually lists
to 45,000,000 tons per annum. That is the number that they
strive for for a long period of time.

(25:49):
That is sort of critical mass that can get underwritten.
They also come out with these ore specs.
So we're talking about the iron content, silica alumina, which
again is just bonkers because they don't even have a project.
It's like coming out with a scoping study and saying this is
what we'd like to mine, never mind, we don't have it, let's
get to work. Even just the the the team who

(26:12):
was clearly like on a mad rush to to try and find a suitable
like deposit here, like can can you just like imagine the the
work that they're having to to do?
I mean, they're, Twiggy's clearly got it in him that we
need to, we need to make this cycle with like hire to mark as
fast as possible this window is open.
So everyone's in a mad rush to try and make this window with a
big bold vision. And at this stage, maybe he's

(26:35):
got some foresight into the Chinese steel mill demand to,
to, to, to work into it. But like the geology team, like
they've, they've just got to find a deposit out of in such a
short period of time. It's it's kind of remarkable.
Yeah, I mean, we are very early in that cycle.
Like it is just just picking up that again, the 1st inklings of
the wave. Yeah, that starts to come on

(26:56):
very quickly. Yeah.
And the, the geology team that they're less than inspired when
they first come in. They think this is sort of
ramshackle the most unorganized company they've ever sort of
worked at. They, you know, they, they share
the results of what happened at Matt Nicholas.
And they're all terrified to kind of, but they're sort of

(27:17):
thinking in the background and they're, yeah, there's a few
names when we crack, you know, Cloudbreak in, in a moment.
There's some names that deserve a lot of praise for their, their
kind of thinking. But the company gets to this
point in time in, in late 2003. They have the, the annual report
and they, they share the register for the first time,

(27:37):
which is a really interesting sort of snippet.
So Twiggy is, you know, he's there.
He's preaching about cracking the oligopoly, which is Valet
Rio BHB opening up the pill bra.And what I love what you see
throughout what you see in the logo, They're talking about the
national interest. You know, this is God's work
that they're doing here. Look at the Register here.
So you can see a name, Emichromethere.

(28:02):
Emichrome is a company that belongs to a fellow called Kichi
Wong. So Mr. Wong is from Sydney, put
in $1 million in 2003, to this day still owns 3% of Fortescue.
By 2008 he was a, a billionaire.Now this person had backed
Twiggy at Anaconda and actually found a bit about him online,

(28:22):
sort of punched it on a, a number of mining stocks out
there. This was undoubtedly the the
best. How's that?
The directors and management holds 66% of of the company with
the vast majority of that being Andrew Forrest's holding there.
And they also come out with thisdevelopment timeline.
So they want to go from scoping to PFS to DFS within 3/4 all up

(28:45):
that wasn't actually achieved, but that that is the goal that
they had. They want to start construction
now in 2005 and they want to be shipping all by the end of 2006.
So they are a team on a mission to answer your question before
about the the rocks that they are hunting down.
So like I said, Mount Nicholas was the the initial aim that had

(29:07):
super high levels of impurities.But there was that, that hope
that I sort of hinted at that they got to the idea is that
they're testing for these thinner sheets of iron ore over
much more expansive areas as opposed to these deeper deposits
that Rio Tinto and BHB had mined.
So the, the G OS, Barry Knight, David Mendelowitz and Eamon

(29:27):
Hannon. And I'm sure there's a a whole
bunch more that deserve credit as well as John Clout, who was
more from a a metallurgical background and had worked at the
CSIRO. They are the the technical team
that is credited with the the Super original thinking that led
to the breakthroughs that they had here.
And I mean, we're, we're still talking about it's banded iron

(29:48):
formation that they're that theyare ultimately still looking
for. It's not, it's not channel iron
deposit or anything like. That so?
So they were hunting for these channel iron deposits and then
they land on these bedded iron deposits, which ends up being
the dominant mineralization for for the vast majority of their

(30:08):
their projects from Christmas Creek through the cloud break.
So, so they're making some progress on the on the on the
tenements, but what about the infrastructure mate?
The infrastructure mate can't understate this.
They were fully committed to being a multi user
infrastructure player. They came up with this plan.
They wanted to create the Pilbara Investment Fund.
They would like to call that theTPI.

(30:28):
Now this would be housed separate to FMG mines and it's
ambition would be to debottleneck the, the Pilbara.
Like this was so different. Like Fortescue would would be
holding 40% interest in this andthey wanted to list this, you
know, with the idea that different investors are
interested in infrastructure andand mining.

(30:49):
So what could have been, but they, they never sort of
officially stop thinking this way.
It just kind of whittles away inthe background.
But for, for quite a, quite a couple years there you, you see
them talking about this. Meanwhile, they, they hone in on
this $1.85 billion CapEx number,2/3 infra, 1/3 mining and they

(31:10):
Chuck up in a presentation what the payback period is going to
be rapid, rapid payback. How's that for a payback period?
So they're, they're iterating ona lot of these things and
they've just got a number that kind of works.
And it it works for a couple years, they start signing all
these memorandum of of intents. Yeah, clearly the rationale
behind this, you know, PIF building infrastructure fund is,

(31:31):
is just, it's, it's a seemingly insurmountable amount of CapEx
that needs to go into this. And, and they're trying to
assure like, presumably like reduce what what Fortescue
themselves have to be able to fund so that they can actually
get away. Yeah, 100%.
And I think they can pace in different types of investors.
You know, there's the the big allocation from the junk bond

(31:52):
market that they think they're going to get as well as Chinese
a lot of stuff Chinese state owned companies particularly on
the on the mining front as well.They would prepaid, they wanted
to get a lot done via prepaymentand that that type of thinking.
How big is the CapEx like? When it's all said and done,
it's north of three. North of three, but they're not
saying it's going to be 3 at this stage they.

(32:12):
Don't know it's going to be 3 atthis stage, yeah.
Amazing. So they start saying signing all
these memorandum of intents, that is, you know, according to
some people in the market, not worth the paper it's written on
or, you know, the equivalent of toilet paper as as someone else
sort of said at that point in time.
But there is interest from the steel mills because the steel

(32:34):
mills want to crack the oligopoly as well.
They don't want to be beholden to the three major companies who
they seriously worried about having pricing control.
So Russell Scrimshaw and David Liu, those two deserve a lot of
praise for just going over to China.
They didn't even have any or to to sell, but they just hung
around in, in the lobby. They took every meeting they

(32:56):
could kind of get they, you know, signed every half decent
deal they could to just start generating some interest and bit
by bit it started coming together.
And when they start announcing these, there's this, you know,
going through the announcements,there's a bit of language that
really sort of stood out to me. I, I kind of love it.
FMG will continue to relentlessly progress this
project. So at.

(33:17):
This stage, what is the project by the way?
The the project is loosely that they're going to mine something
in the eastern Pilbara. There's going to be a big
railway we don't and a port, so we.
Don't doubt it. We don't know what the project
is yet. OK, No, it's at least that's
remarkable. You got, you go to China, you're
getting a bunch of yeah, like, like commitments from steel
mills. Not, not.

(33:37):
I know it's an MOU, but it helpsyou progress things.
I'm, I'm pretty sure the dynamicfor those steel mills as well,
what they needed themselves in order to be able to, you know,
borrow from the, from the State Bank and whatnot was was, you
know, a signed indication that they had supply commitment like
coming through. So everyone, everyone was

(33:58):
incentivizing, you know? It was a lot of work, Yeah.
A lot of smaller steel mills were popping up at this point of
time. You had the big ones.
Yeah. But then they need supply they
yeah. And if you if you just sign
something and I think the prepaid which ultimately comes
comes to fruition is, is part ofthe incentive of the steel mill
to it that that made that'll happen was their own internal
financing dynamics. They were hungry.
They were super hungry for supply.

(34:20):
They actually get another speeding ticket around this
time, which is worth mentioning because it it kind of happens in
the in the lead up to the team flying to China to sign these
agreements. Graham Rally, one of the
directors buys a bit of stock, then they sign these agreements,
the very first ones, the stock ticks up sort of like it was 40
odd percent and that lands them in a bit of hot water with ASIC.

(34:43):
That one sort of blows over. I think it was yeah, there was
no kind of male intent there. They sort of really, really
buying into the the project, thedirectors and the team and
everything and there's lots of announcements.
Things are happening very quickly at this at this point in
time. Where's iron ore price at?
So this is something you have tokind of wrap your head around.

(35:05):
Back then, iron ore was priced in benchmark, so very similar to
TCRC's in copper. Today a price would come out at
the beginning of April because that lined up with the Japanese
financial year and that would bethe iron ore price for the year.
So very different today you'd have a major producer and a
major steel mill say you know, Bauer Steel and Farley would get

(35:27):
together and that would set the the price for the the whole
market. You know, you see it in zinc,
TCR, CS today. It was the the sort of way of
doing business back then. And obviously things changed in
in 2010 is when that that kind of changed.
But I know in 2004 specifically jumped up about 20% and Chinese

(35:48):
iron ore demand had been growingat 16% for the previous ten
years. So that that is a that's a a
rapid clip to be grown at. Big time, Big time.
There's one other thing I'll I'll mention at this point in
time, and I won't touch on it again throughout the story, but
FNG are constantly trying to getaccess to BH PS Rail.
You see these legal letters coming out all the time and it

(36:12):
ends up being not the right kindof thing to to chase after.
And they end up just wasting a little bit of time in, in
hindsight, why they were doing it is is clear to to chop down
that infrastructure spend. And they were arguing that third
parties should be able to use, you know, these these private
bits of rail as they were national infrastructure.

(36:32):
But BHP was never, never, ever going to allow that.
And it, you know, just ends up being a big win for the lawyers
over a number of years. So they've got to build their
own rail, I suppose they're they've got to find a deposit
that actually is usable too. They have to find a deposit and
this is where mid 2004 they cracked the understanding of the

(36:54):
the now remember iron formation,what they're really focusing on.
So we mentioned the, you know, the the CI DS, the channel on
deposits they thought would be the dominant mineralization
didn't prove to be the case. The the bedded on deposits are
what you know, ends up being thesort of pay dirt for them.
So there's a strata form hosted in ancient iron rich marine

(37:20):
sediments, so kind of old oceans.
And these are hosted in the Moody member at the base of the
the mayor member iron formation.So that we we sort of show a map
and you can have an understanding of of what the
Pilbara looks like. But this was unique thinking and
it turned out to be a win for them because these deposits,
like I mentioned, were were different pros and cons to it.

(37:41):
But on the positives they had, they were larger, they were a
bit more consistent and they could potentially be easier to
mine with a different mining method.
On the downside, they were lowergrade and could be higher in
impurities. So it wasn't completely a win
win. But you can see through that

(38:02):
2004 period, the, the thinking is really evolving and they
really sort of knuckle down to, to, to what works.
So I think it May 2004 was when they first mentioned these very
flat lying deposits and that that was just counter to all the
assumptions that BHB and and Riohad.
So in June 2004, they discoveredCloudbreak.

(38:25):
That is an enormous moment in time for for the company, like a
a really, really big moment. It actually takes a while from
when they discover it for that deposit to become or that area
kind of to to become the the priority for the company.
And the reason why beyond the the like geology is that it's

(38:45):
it's 60 kilometers closer than than Christmas Creek and even
closer than Mount Nicholas to the port.
So much less rail will be neededif they can prove that up.
Gotcha. The the the Geo team there named
it after a wave in in Fiji. I know it's nothing about about
surfing, but it's kind of, I like the idea that, you know,

(39:06):
that the Geo team there had had sort of free reign to to do do
their thing. And yeah, and.
Is the mineralization a surface?Is that how to think?
So think kind of 10 to 35 odd meters of overburden.
OK, yeah, that that's what you're kind of working with
over, over large kind of swab. So it's not, it's not that

(39:27):
thick. It it ranges from like a few
meters in parts to kind of 20 meters in thickness, but 800 to,
you know, 2 kilometers wide in, in in pockets and 30 kilometers
of strike. So long flat line sheets now
that those sort of numbers I just mentioned with for
Cloudbreak Christmas Creek, which is think of it kind of

(39:50):
like just to the to the southeast of of Cloudbreak and
what ends up being the second pine.
It gets hooked up attached lateron, not too much later on that
has a strike length of that 20 kilometers, 500 kind of meters
wide thicknesses up to 35 meters.
So you can kind of mentally visualize.

(40:10):
What these deposits look like and and you can see on the on
the diagrams that these are kindof compressed in because these
things are are quite long in in nature.
I follow. How about the metallurgy like?
The Met goes hand in hand with the the geological
understanding. So at this point in time, they

(40:32):
mention that this, this type of ore requires little processing,
which had always been the goal. You know, you, you want this to
be a, a logistical operation. Twiggy is petrified of anything
that has complexity to it in the, in the processing sense.
So they at this point in time, herald the the identification of

(40:54):
direct shipping ore and a whole bunch of it at Christmas Creek
because they've cottoned on to what they started to realize
earlier that the presence of this micro platy hematite,
which, you know, I'm not a met. I I I read a lot about to try
and understand and John Clout, the the met spoke a lot about it
and and wrote a fascinating paper on it.

(41:14):
But the DSO all had this in in abundance and the steel mills
really like this because of its sintering qualities that would
improve the value in use. Ultimately, it'd make the the
rock that they have more valuable.
The the Fortescue and Twiggy dubbed it the the Holy Grail of
iron ore in the Pilbara. They even plastered it over

(41:34):
their 2004 annual report. The Holy Grail of iron ore.
Don't just forget the the grade,but everything else night.
Look at the look at the cover ofthe annual report 2004 and what
you can sort of see in the background is the the
crystalline structure of it. So that they were, they were
really, you know, thinking this is a, a big deal.
And the industry hadn't thought the Chichester range would be

(41:55):
prospective for this. It was a poorly understood area
that hadn't really been drilled since the 70s so.
You'd have all of the incumbent iron ore geologists that are
working at BHP and and Rio kind of thinking these guys are
crazy. Yeah, I'm sure that wouldn't be
the only time people thought they were kind of crazy, but
there you kind of go. So to to capture where we're at

(42:16):
at this moment in time, they found these ore bodies, not the
highest grade in the world, potentially easy to mine and
process, potentially got the right sort of specs to them.
And you start to form the picture of a much more
simplistic operation. This friable ore is suitable to
dry processing, easily crushed fines without grinding or

(42:37):
anything like that, low mining cost, don't need to drill and
blast, which we'll get into later.
Lower processing cost, less penalties, that doesn't turn out
to be massively true. And a lower CapEx, still decent
sized CapEx, but the CapEx is very much weighted to the
logistics, not to the processinghere, so.
What is the grade of this that you know at this point in time?

(42:58):
What they start delineating is alot of ore at 58 ish percent
with high grade pockets of 60. Yeah 60%.
You know, plus or minus a few decimal places.
So they're talking about DSO INGat 58% ish grade, but you know
without beneficiation there's nomarket for that yet, right?

(43:20):
Like that's that's not what realworld PHP are exporting.
It's it's parlays beneficiating themselves to.
I think, you know, iron ore is, is very nuanced and the, the,
the steel mills look for a number of different
characteristics and kind of whatwe spoke about with aluminium
out, it's the same with bauxite in that case, like they will,

(43:41):
they will take a bunch of of different ores and they will,
they will sort of blend it all together.
So that 15% that 10% this, 25% that and they'll piece it all
together. So they start working, you know,
hand in hand with the steel mills to find a product that is
achievable for them and is acceptable for the steel mills.
And that fast centring speed that the the ore has becomes a

(44:05):
an attractive characteristic that the the meals want.
All this at a point in time the company is still kept at $55
million. Wow, is that all?
Yeah. This is mid 2004. 55,000,000
Bucks. Yeah.
But I think you can sort of say that they've cracked the code
geologically. The PFS is just being kind of
altered on the fly. They start coming out with

(44:27):
resources now. So things are chipping away on
on that front. Christmas Creek is the priority.
They come out with this quarterly.
And you know, characteristic bitof spin here, so funny.
One of the highest points for those listening is brokers
commence positive coverage. Now at this point in time, at
this point in time, yeah, there was 1 broker covering them,

(44:49):
Yeah, Who'd done the race for them earlier that year?
Yeah, but. There's something to be said
about about what will, you know,ultimately come, come, come
about from that financing perspective, because there's one
thing that's true of of earth brokers.
It's like if you, if you lose someone money like the brokers,
they're just not going to back you again.
So he would have been so out of favour for any, any, any of the

(45:09):
Perth brokers that that had, youknow, kind of followed him in.
So he was into Anaconda. So it it I can I can understand
why it might have been difficultin those early years to get the
Perth brokers on board, but he wouldn't, he wouldn't need them.
Yeah, I think, I think you're right.
And even in the Anaconda days, he didn't do the the traditional
route for a couple of reasons. He wanted to minimize dilution

(45:31):
and people didn't want to back the project.
They didn't think it works. So I think the, the whole kind
of Andrew Forrest story has never been filled with universal
backing of the the Perth brokerage community, which is in
itself wild because the rest of Australia, the East Coast
considers Perth brokerage community a bit a bit wild.

(45:51):
And you know, high on the on therisk sort of tolerance spectrum.
They keep chipping away on multiple fronts now and they
start to sign those prepayments that you mentioned earlier.
So Hebei come in for for 10 million bucks, you start seeing
all this sort of stuff that evenone year earlier would have been
just bonkers, right? And these steel mills are given
10 million bucks upfront. For a no, no, there's always,

(46:12):
there's always strings attached.So another one signed a week
later and how they structure it,that one's a $28 million
prepayment, but it's think of like half of it will be payable
when construction starts, half of it on 1st shipment type of
thing. So it's it's not as helpful as
it sounds. It's not cash in their pocket

(46:32):
right now. Yeah.
It's, it's still, it's, yeah, it's, it's still a substantial
financial commitment given the stage of the actual progress at
that point in time. Totally.
So one of those steel mills thatsign a contract is Fengley along
with the $28 million conditionalprepayment, they make a
$7,000,000 equity investment andthey do that at a 50% premium to

(46:55):
the the closing share price before.
So they do that at $1.00 a share.
Wow. So Wu Yu Mings, this family
group was just a a small small steel meal on the outskirts, not
a state backed entity. That stake he bought became
worth $700 million in four years.
You don't think that when you pay a 50% premium?
No, no, wrap your head around that.

(47:17):
They then come out with this announcement in late 2004, which
like, like barely believable. You can't quite believe it it it
is looking as if sort of every Christmas has come at once for
the time as if it's all fallen into place.
They announced that China Harbour, China Rail and China
Metallurgy, 3 separate state owned entities from China have

(47:40):
signed binding agreements to both construct and finance the
whole project. They, you know, will see that
FMG pays less than 10% the $1.85billion upfront to build this
massive logistical and and mining operation that is just
staggering. That's.

(48:01):
Crazy the the idea that Andrew Forest had convinced another
company to not only build but use their balance sheet to, to
finance The thing is just amazing.
But there's a a bit more detail that comes out on this one later
on. So we'll we'll touch on that.
In a in the form of a prepaid. They would, they would pay for
it and then Fortescue would pay them once at all.

(48:25):
It wasn't totally clear that theidea was that they would pay
them once it's done and partly through prepayments as well, so.
It's still like, no, no, no, yeah.
What a non dilutive way to fund a tremendously enormous CapEx
for a very small company. Yeah, there's a few twists and
turns along the way in that one,but they need to get things

(48:46):
approved first. So, you know, they're kind of
put in the cart before the horsein in a few ways.
But thanks to some fantastic lobbying help, they get this
thing called a state agreement. And a state agreement in in WA
is fantastic because it kind of clears the path for all your
various forms of approvals because, you know, if you
actually think about what they're doing, you need to check

(49:06):
off a bunch of different things.So this gives you a clear
passage to kind of do it. And they did this through the
help of Brian Burke and Julian Grill, who some of the older
money miners out there might, might know for their presence in
in WA in the heated times of the1980s.
Now this was a a big deal that caused a lot of controversy
amongst politicians. Some politicians are thinking,
hey, why the hell are we back inthis project getting behind

(49:29):
this? It was done right at the end of
2004. They were very opportunistic
about how they, you know, they were cunning in how they got it
away. And you've also got BHB and Rio
Tinto, who are a bit pissed off because they're now thinking,
hey, you, the government are prioritizing this upstart over
projects that are actually goingto get up and running, that are

(49:49):
actually going to, you know, lend more to your taxpayer
coffers and royalty payments andso on.
So, yeah, you've managed to upset a lot of people.
And even funnier, Burke and Grill thought that they had
negotiated a success fee to get this away, to get this big bit
of work away. Now, Twiggy was of the view that

(50:09):
they had negotiate a success feeto get the state agreement as
well as to get Hope Downs tied in with what they were trying to
do, and they wanted to get paid that success fee in stock.
The stock from this point jumps from late 2004 to early 2005
from $0.60 to three bucks. So these guys are very pissed

(50:31):
off now that they haven't got paid in stock and that stock,
you know, went on to 5X. So it was too bad for them.
FMG had their agreement, they were on their way to getting
expedited approvals and they're off to the races.
Unreal bit of lobbying goes a long way when you.
Goes a long way mate. Yeah, so chapter 4 mate, 2005
comes. That is right.

(50:53):
So 2005 starts with a hyper buzz, and it ends up being a
incredibly testing part of the the company's history.
Iron ore jumps 71%. Oh my God.
This is a bulk. Like 71% is crazy.
It's the largest price rise in iron ore's history.
The the animal spirits, the commodity animal spirits are

(51:13):
out. Steel mills are hungry and the
market cap of the company surgesthrough $1 billion.
FMG enters the SX-300, then on to the 200.
Andrew Forest on paper is very wealthy, exercises the the end
of his sort of options. So he's got that all in, in
paying up stock in the company and just if you are thinking

(51:36):
along to what the FMG share price is today, they would do a
one for 10 share split in 2007. For 10, so that the 5 bucks is
like $0.50 in today's terms? That's right.
OK. Yeah.
So gives you a hint of of what happens on the on the share
price front there. So they're on to the better or
they are cracking that code. They're getting the scale.

(51:57):
The work focuses in on ChristmasCreek and Cloudbreak.
They stop working at Mount Nicholas, they hit the billion
tons. Things are chipping away and I
won't mention that kind of too much more because that just
keeps growing in the background.They prove out the deposits.
They spend huge amounts on on exploration to get it there.
The grades don't end up being what we'd kind of hinted at
before, but because of the qualities, it kind of works and

(52:19):
they get a very good idea of where the railway is going to
go. They've already hooked in on
Anderson Point. They did that actually very
early in the piece, which is going to be where the terminal
is built in Port Hedland. So things are all happening on
on that front. Is it like in terms of just the,
the certainty of this financing and everything like at the point

(52:39):
that the yeah, you get the Chinese kind of prepaid there,
is it kind of like a, a mentality of FID is, is already
kind of here. So we're just building it
already. But I'm sure there's still, you
know, parts of this CapEx that that still are unfunded.
Like what's the the the thinkingfrom a project execution
perspective and and spending like?
So the market is more or less convinced that things are

(53:01):
happening. Pockets of the market, they're
convinced that this is happening.
But then you get to March 2005 and I'll, I'll tie this all up
and call it the the China financing debacle because it is
a true disaster. What kind of happens here?
So you have these three state owned entities who have agreed
to pay for everything, agreed tobuild it, construct the whole
thing. This comes to a screech and

(53:22):
halt. They're no longer happy.
So China met is fronting the thegroup, the three of them and
they say they're no longer prepared to back that agreement
which signed with you in sort ofNovember, October 2004, at least
on the terms it was kind of indicated they wanted equity in
the project. Now what they were doing was
taking a a very big risk. That's kind of understandable.

(53:44):
They wanted equity Despite that not being in the original
agreement as the market knew it.And it kind of throws open the
question, what is this binding agreement that you've actually
signed with this Chinese counterparty?
It throws open another question.What good is a a binding
agreement with a Chinese counterparty if they don't want
to do it anymore? So.

(54:05):
It's yeah, it's not very good because yeah, you're not going
to be able to reinforce that in Chinese course.
Exactly. So to counter the the market
fallout, FMG publicly share the agreement.
It turns out this is just a few pages and it's titled Framework
Agreement. It stipulates the parties will
work together towards a more fuller and detailed agreement
later on. So the Chinese group indicate

(54:28):
they are not willing to pursue this unless they acquire A
majority interest, equity interest in the project.
It's sort of reported that they would happily take 80 to 90% of
the project and free carry FMG, which, you know, wasn't
considered for a moment by Fortescue.
But it's kind of interesting to think about because at this

(54:48):
point in time, that would seriously minimize the amount of
cash flow and the the value of the stake in in the business.
But it would be a very de riskedway for for Andrew Forrest to
make a a, you know, a lot of money for, for himself.
But like I said, that was never considered for a moment.

(55:09):
They explored potentially selling down 2015 to 25% that
didn't end up eventuating. So yeah, you you get a whole
host of questions being thrown up at this point in time and the
market is questioning, hey, whatelse is there a bit of a bit of
spin on As well as that they need to go back to the drawing
board and and finance this wholething.

(55:30):
So the the whole debacle leaves them with a fair bit of egg on
their face. I wonder if the the the the
equity kind of component of all of this.
I wonder if like part of the yeah, it's like the the
strategic national interest of China is, is, is coming to
fruition there as it is. Like if you're a JV partner and
you require mutual consent to dothings and all of a sudden you

(55:51):
get a lot more sway in in in theproject than than you would as
just a the lender. Yeah, I think you're right.
You know, we, we always speak about how strategic they are and
how, how long term they are in their thinking.
So it wouldn't surprise me if ifthat was the mindset back then
as well. The, the market reaction though
to FMG and it's sort of stock is, yeah, it's, it's not great.

(56:15):
The, the stock had 10X from whenthe first agreements came out
with the Chinese to March. When this falls apart, the stock
then drops 40% in a very short matter of time in about a week,
I think. So it goes from 5:50 down to
3:30. There's another actually

(56:35):
hilariously embarrassing bit of news that comes out.
One of those prepayments. It's revealed that it can be
paid in cash or equivalent. So the steel mill says we don't
have the cash we can pay you in steel plates.
So again, just how that was kindof misconstrued to to the market
raises a few questions, but in hindsight, it's funny.

(56:58):
It's very funny. So on top of that, there's some
more negative news. There is a CapEx warning that
CapEx is going to blow out and Twiggy is going around
Australia, going around the world convincing people that
that number is not going to start with a 3, it's going to
start with A2 as opposed to the 1.85 it had previously come out
as. So to buffer that and you know,

(57:23):
kind of warm up shareholders a bit, the iron ore price has
massively risen since they firstcame out with that 1.85 number.
So they're kind of trying to compensate and say, hey,
revenues are going to be substantially up on what we said
as well. But they're not a billion dollar
company anymore. They're like.
No, they'd be in the six. 6 hundreds.
In that sort of range 6. $100 million company that needs to

(57:44):
fund $3 billion of CapEx and your source of funding is just
just vanished. So it's, yeah, a challenge.
It is. They've got a bit of financing
at that point in time to see them through.
But yeah, there's a few other sort of curveball that
curveballs that that come their way.
They revealed that their products going to be sold at a
5% discount to to Rio's high quality stuff that doesn't

(58:07):
happen. They acknowledge that.
It doesn't happen because because they're always lower
quality. Yeah.
When you say it doesn't happen, it's like it's actually more
than a 5% discount than it sellsthat much more, Yeah.
Much more, yeah. They they acknowledge that Q6Q4
2006 isn't going to be achievable.
It's going to be pushed to Q2 2007.

(58:28):
They guard to a 22 month timeline and they do for the
first time hone in on Cloudbreakbeing the project hub.
This means 260 kilometers of rail, not 400, so that's a win.
They raise a bit of money as well.
Equity, no con notes, con notes,con notes.
So first up 40 million Aussie and then US 50 million.

(58:52):
Now that US 50 million con note,I have to go on a bit of a
tangent because it's fascinating.
It's with a group called Habit who sees a hedge fund called
Harbinger Capital. Harbinger is run by a fellow
called Phil Falcone. Now he would become one of the
highest earning hedge fund managers in the world.
He'd become a billionaire. He'd make I think a couple

(59:13):
billion dollars shorting subprime mortgages.
He would make a couple billion dollars on Fortescue.
I believe he would amass a 16% roughly stake in Fortescue.
He was familiar with Twiggy. He'd backed him at, at Anaconda
as well, actually. And yeah, at the, at the kind of
heart of the financial crisis, he was, he was the bay's knees.

(59:34):
He was going around New York, bought a $50 million U.S.
House, like a house in New York.You know, he's, yeah, he's, he's
feeling himself to, to say the least.
But his story is an interesting 1 and it goes a bit pear shaped.
Firstly 2008 ends up being quitea poor year like it does for for
most people, so that's not too much of A knock.

(59:55):
But he ends up getting accused of using 110 million U.S.
dollars from client funds out ofthe fund to pay taxes and then
gets accused of market manipulation, which he confesses
to or gets proven guilty of at least and gets banned from from
the industry and later declares bankruptcy.
Sorry. Wow.

(01:00:15):
It was a all from grace. Yeah, it was a a bit of a fall
from grace, you could say. A bit of a fall from grace, but
an interesting story nevertheless.
It is, yeah, 2008 now part a part of the story that we kind
of haven't haven't talked about yet was I mean, to build a giant
260 kilometre rail and a big bigbuddy iron old mine in the
Pilbara, you're going to have tolike negotiate with the
traditional owners. Like what were those like land

(01:00:37):
access negotiations like for? Absolutely right.
So in late 2005 they come out with their first land access
agreements. So the first one is signed
within Inya Pali people. Their area covers 80% of what
was initially going to be mined.Doesn't prove out to be that
way, but it's followed up with agreements with the Paluku and
the Cariara people. The, the Cariara people's land

(01:01:00):
is most of the infrastructure and the, the Palakus where
they're going to mine, where youcan see on the, on the map
there. So this wasn't without it's
controversy that the initial agreement was reportedly signed
with six elders who had broken away from the broader group.
And there was, or there still isdifferences in opinion over the

(01:01:21):
presence of lawyers, you know, something that was agreed upon
that there wouldn't be lawyers for the final sign signing and
so on. So yeah, that that ends up
coming together. I think there's a much more
controversial component with theagreements with the Yingjibani
people that was for for Solomon that would happen in this kind
of time frame. But that that isn't the sort of

(01:01:42):
part of the story that we're focusing on.
You can see sort of parts of those discussions on on YouTube
out there. But I think to, to round out on
the point, like Twiggy's views on providing Indigenous,
Indigenous Australians with, with work as opposed to welfare
payments, you know, he's, he's relatively outspoken on, on
those components. And you can, yeah, you, you can

(01:02:03):
see them just with a quick kind of search.
His method would always kind of be awarding contracts to certain
businesses and and so on. I think it, everyone listening
would have their own views. And, you know, you can sort of
debate what, what is fair and what's the, the, the right
approach and separating native title groups is, you know,

(01:02:23):
certainly a controversial way of, of going about it.
But by late 2005, they have sortof in principle agreed with all
the relevant native title holders to to get the projects
built specifically for here for for Cloudbreak and Christmas
Creek to have it get together tothen line up with with the rest
of the approvals that they have.That's a, that's a big, you
know, a big, a big unlock. They now have a pathway to to

(01:02:45):
building it. I suppose they need they need to
figure out how they're going to mine it and and get real funding
in place. Yeah, yeah, totally.
I, man, I, I went down a real rabbit hole learning about this.
I found it fascinating because almost on every front they're
trying to do something different.
They're kind of forced to do something different to be cost
competitive. So I, I found it really
interesting. Firstly, on the mining front,

(01:03:07):
remember we're talking about flat lying, thin, shallow
deposits. So strip mining conceptually
makes sense for that. Think coal mining, although coal
is a very different material to to iron ore.
So conceptually it works and it would be a big sort of cost
saving front if they wouldn't have to go the drill and blast
route, at least not initially. So excavators and trucks would

(01:03:29):
be used to remove the overburdenthat would be replaced into
mined out panels later on. Once you've got it exposed,
you'd have these continuous miners that would kind of chew
up strips 2 1/2 metres wide, sort of foot deep type things
and spit it out into a truck on the other end and you'd mine six
different kind of areas at the same time.
You'd have a number of these strip miners working.

(01:03:50):
These are these the giant surface miners is like how, how
to think of them, right? And yeah, they, it's the kind of
equipment that is, it's, it's used on like the, you know, the
the salt lakes of the Atacama brines and those those kind of
things. I saw we'll show a photo these,
the ones they start with the Burton 2500, beautiful little
beast. They're, they're relatively
small actually, like I said, as I said, 2 1/2 meters by a foot

(01:04:13):
deep that they're chewing up andspitting out.
So you can see there what it looks like.
They then migrate to the Burton 2400, which is a bigger beast.
But yeah, it was it was a novel approach in in more ways than
one because you know, the surface miners, if you think of
them, they've got these kind of picks on them.
They need to to RIP it up. And these picks were just
getting completely thrashed. So they ended up kind of

(01:04:34):
engineering their own picks thatthey would then build in in
China and sort of fit them onto onto their surface miners to get
the job done. But.
Mate, like if you've never seen one of these things, I suppose
most people would be like, it's literally like a big lawn mower.
Like, that's remarkable, anyway.It was another, another sort of

(01:04:56):
area in which people could kind of mock them and, and their
approach and, and saying it wasn't going to work.
But yeah, there, there were plenty of benefits from what
they were doing. You could be more selective.
You could then. Important lower CapEx startup.
Yeah, absolutely. And then you've got, you know,
selective kind of great control.It's better for that lending
purposes, cheaper, less explosives, you don't need to do

(01:05:17):
the big sort of primary crushingcomponent to it, smoother areas
for the trucks to drive on. So, you know, truck tires are a
big cost for, for an operation all these things like yes,
there's a, a productivity downside to it as well because
it's smaller in nature. But I, I love the creativity.
Yeah. And, and it didn't kind of end

(01:05:38):
there on the processing front. They incorporated this
descending capabilities. So this would lower the alumina
and the silica levels by removing these sort of fine
clays and and bits of shale thatthey had in in the OR there to
make the customer specs like thethe uniqueness of what they're
doing here is, yeah, having to create this product from

(01:06:00):
scratch. It's not a marketable product to
the steel mills like we said before.
So they haven't to to work with them.
And they did a lot of work with the university in China that
would work with the steel mills to get it done there.
What about on the on the on the rail front?
Kind of think rail is rail. What what can you kind of do
differently there? They come out with these sort of
40 ton axle loads. They are the the heaviest in the

(01:06:21):
world, Some some say. And FMG designed these smaller
wagons a bit of a lower center of gravity that the ultimate
length was very similar to and ahalf kilometers massive,
massive, you know, beasts when they're towing along like
roughly 32,000 tons of material.And they really pulled in the

(01:06:42):
time frame to build this, that that was a a cost saving in and
of itself. Were there any kind of like
decisions to to to make the to minimize CapEx as part of that
that actual like rail, was it like a different dimension kind
of rail to it? Yeah.
I mean one of the things they did was try and build in BH BS
corridor. So that corridor had sort of
been made already by BHB. So they would save CapEx on, on

(01:07:05):
that front. The the cart turning machines as
well were relatively not novel and and newer.
So they would sort of be more time effective.
Yeah, when the the ore came to Port Hedland and would be
flipped and and chucked into therehandling facility.
Yeah, yeah. The symbols involved in rail,
it's like you're always underestimated in my head

(01:07:26):
because you need the rail to be so flat as opposed to.
And so there's so much earth moving involved.
It's an expensive operation to build a rail line, that's for
sure. So 2006, I sort of think of this
as tying up a lot of the, the kind of loose ends, permits,
studies, approvals, contracts, they're all coming in, mining,
haulage, logistics, that's all kind of coming together.

(01:07:48):
But you've got the one big obvious thing I need 2 1/2.
Billion dollars. Where's the money?
Where's? The money, so remember Fortescue
at this point in time is kept at$1.4 billion.
They need 2 1/2 billion. You know the the Aussie dollar
is starting to do some really strong things.
It gets to a, a level that it kind of maintains or betters for
the next 15 years. And FMJ starts also winning over

(01:08:11):
the investment banks, a bit of backing in that community, which
isn't the hardest thing when there's fees up for grabs, but
they do get in $200 million in aloan facility that sort of ties
them through. And yeah, they they start
getting a a bit of traction despite all the the rumors that
BHB and and Rio are out to kill them and pressuring banks and

(01:08:31):
analysts from covering them and all that sort of stuff.
Have they actually started building anything yet?
No. They're doing trial mining.
Trial mining, late 2005. And, and honing in that, that
the engineering kind of technique to yeah, yeah.
There's no there's no rail construction or anything like no
ordering of long lead items or anything like that.
Long lead items start being ordered in 2006, right on the

(01:08:54):
back of that $200 million check.OK, gotcha.
This is happening one way or another, but they get hit with
some serious charges from ASIC in early 2006.
Now this is AAI think a consequential part of the story
in the fact that like the personal toll charges would have
over over some like over an individual and over the company

(01:09:17):
as well because ASIC were charging Fortescue as well as
Forest individually in relation to its disclosure on what I sort
of called the China financing tobacco.
And this was almost exactly 1 year later.
So they've been investigating for 12 months.
If you remember, the stock had 10X from the first announcements
to the, the fallout when it revealed, you know, they weren't

(01:09:40):
all that binding or as you know,as that was sort of reported by
the Chinese. So the severity was increased
with the fact that Forest had sold $13 million of stock in
early 2005 after he'd exercised a bunch of options.
So on the back of that ASIC, we're contemplating insider
trading charges as well. And they wanted to ban him from

(01:10:01):
any company director. And in this case, we'd go on for
for years. FMG would vigorously fight the
charges, as would Forest. And interestingly, the market
wasn't too bothered at this point in time.
The, the stock was back over over 6 bucks.
But to kind of cut to the chase on, on what happened.
Forrest firmly believed that those contracts were binding.

(01:10:22):
And that's, that's what he'd argued.
And he, as well as the company in his perspective, had had done
nothing wrong. So he floated the idea that this
was all just a, a ploy from Rio and BHB and, and they're kind of
lobbying to to down the company.In any case, this toils way in
the background until 2009 when Forrest wins all, all cases, you

(01:10:45):
know, against him. However, something actually came
out in at that point in time, itwas sort of proved that the
Chinese reviewed all the wordingand approved all the wording of
the FMG announcements. And in big bold letters, you can
see the words binding and these sorts of things.
So the Chinese had approved this.
So it it was, it was complicated.

(01:11:08):
And I certainly haven't read allthe the court docs, but you can.
Yeah, there, there's a fair bit out there.
ASIC appealed the outcome and they won in 2010.
And then by 2012, this goes to the highest court in the country
and Twiggy is vindicated. He wins a clean sweep and puts
it all kind of behind him. Although the company was at a

(01:11:29):
very interesting point in time in 2012.
But thankfully in his case, thisis all sort of put behind him
and. Yeah, but he's effectively going
through the, you know, the most sensitive period in the
company's history in some respects.
And, and he himself is under under the massive microscope of
the regular regular. I can't imagine what that would
that would sort of pressure would feel like.

(01:11:49):
I'm sure that yeah, the the media would have been rampant
that that period of time as well.
Bloody media in the worst. Yeah, so.
OK, so I'm I'm following. I'm following so far.
Yeah, that that's us in kind of midish 2006.
Now they then sign an EPCM contract with Wally Parsons.

(01:12:11):
Now this one is worth stressing because I think it's a a big
deal. This is one of the key learnings
that Twiggy had from his Anaconda days.
He was of the view that the engineering group flaw back then
had screwed him over. He'd signed AUS $1 billion fixed
price contract and that left Anaconda just in in floor's
hands hardly and totally in his perspective.

(01:12:31):
And that's kind of what you get with an EPC contract.
So he claimed the bond holders and Glencore had given him no
choice and that that gave the engineer the incentive to cut
corners to, you know, buffer their margin APC contract.
So he said they didn't do solid work and that ultimately cost
him his job. Now that version of events is

(01:12:53):
disputed in in more than one way, but that is what he
believed. And you can't argue that that
shaped the, the journey that Fortescue went on.
So I, I, I found that a really interesting nugget and just
another one of those big lessonsthat, that he learned that,
that, that shaped his later career.
Because all of the all of the ingenuity and and engineering

(01:13:14):
kind of like it's happening to to date up until this EPCM
contract with boy Parsons has been done in house their own
engineering. I'm sure there's been like third
party consultants utilized heavily.
But yeah, but he's built an in house like capability within
Fortescue. Yeah, exactly.
Like even like geologists were working on those pics I talked
about on the surface miners like, yeah, you know, all hands

(01:13:35):
on deck to to kind of solve the problems.
But why sign this EPCM with withWally Parsons?
Yeah, build you have to. A project?
Yeah, yeah, yeah. So July 2006 stock is on a tear.
I know it jumps 20%. The the long lead items are are
being ordered. They come out with this
announcement with a group calledNoble who some people might know

(01:13:57):
of a a I'm not sure if infamous is the right word, but they they
have an interesting story in thecommodity trading world.
They wanted to, I think. Infamous is the right word,
yeah. There you go, infamous.
So they wanted to take a 10% equity stake for roughly US $300
million and they wanted the majority marketing rights, which
was not palatable to Fortescue and no deal.

(01:14:19):
So a week goes by and they come out with this monumental deal.
They sign AUS $400 million agreement with this investment
firm called Lucadia. Tell me.
Tell me about Lucadia and how they structured this.
So Lucadia was a holding company, think of Berkshire.
And later Lucadia merged with the investment bank Jeffries.

(01:14:41):
That happened in 2012. So that's where they're kind of
at now. But it was created by these two
guys incoming and Joe Steinberg and it played a kind of vital
role in 42's history and not always in a positive
perspective. But these guys were seriously
switched on investors, like seriously impressive in their
track record. And I think a bit more should be
written about them because I became to read it.

(01:15:01):
But they grew Leucadia at 19% per annum for over 35 years.
So from the 70s through to the merger with with Jeffries and
their investment saw them take a, a board seat and it was
interesting going back to their shareholder letters and seeing
what they wrote about. They were very complimentary of
the Andrew Forest in his early days.

(01:15:22):
I'll, I'll read a little snippethere.
FMG is the creation of a hyperactive, smart, energetic
Australian entrepreneur named Andrew Forest.
Imagine the Energizer Bunny. So it all starts out kind of
dandy, but it doesn't end that way.
And the the relationship phrase and ends up going to court.
They've got, they've got such like an app synopsis of his

(01:15:43):
character, which you do hear things like that repeated
regularly over the course of history.
Hard work and survival is are inhis DNA.
Not a bad thing to have written about.
Yeah, yeah, it's, I think you're, you're spot on there.
It's, it's super sort of fascinating to to learn more
about the, the character from the perspective of these sort of
really top quality investors. They they also added that Andrew

(01:16:04):
ruled the board with an iron fist, which I don't think is a a
surprise to anyone. Sort of said his personality
dominated the board. And this is what kind of led to
the relationship fraying when itcomes to things like how much
leverage you're going to take onas well as expansion decisions.
It was his way or the highway. And for perhaps, you know, a bit
more conservative investors, that wasn't what they were in it

(01:16:28):
for. Well, they're, they're probably
also concerned with where they are in the debt stack.
And I suppose you've got to tellme about the instrument. 100%,
yeah. So US $300 million of that 400
is an equity investment at a $15share price.
It's a 50% premium. That he's good at that?
Isn't he getting 50% premium? Bloody good.
Yeah, they took 10% of the company.

(01:16:49):
Now the remaining US $100 million is a 13 year loan.
Interest payable is 4% of the revenue from Cloudbreak and
Christmas Creek. Net of royalties.
The iron ore price is nowhere near what it goes on and heads
toward, which is close to $200.00.
So by 2011, these guys have reaped US 1.8 billion in

(01:17:12):
royalties and stock sales. They still own a couple $100
million of stock and a year later they get bought out of
that that debt instrument to thetune of US $700 million.
It's actually a bit more than that.
So what an investment. Has it come with?
Does it did it come with security or anything like that
with a? So your your point before was

(01:17:36):
very sort of switched on becausethey got threatened to get
shoved down the debt stack when Fortescue needed to refinance
themselves in 2012. That was the impetus to say that
would let us buy you out. Yeah, Yeah.
So. Yeah, OK.
I I got you because it's, it's it like structured as a loan,
but everything about that is an equity instrument to me.

(01:17:57):
That's like a yeah, it's a funny, it's a funny.
It's a. Convertible.
It's it's a hybrid instrument. It's.
I mean, it's, it's like a, you know, a short term royalty, you
know what I mean? Like you're getting money
upfront, getting paid back for afinite period of time.
It's fantastic, wonderful. Yeah, or succulent as as
incoming described it. Later.

(01:18:18):
Yeah, yeah. Yeah, so Aussie investors like,
you know, that showed the power of of Lucadia and the the person
on that side of the table in in that point in time, like force,
you needed the money and the Aussie investment community
wasn't prepared to go anywhere near it.
And to the point you you mentioned earlier on on backing
sort of investors. I think this really showed the

(01:18:39):
EU s s hunger and nature to backrepeat entrepreneurs who might
not have been all that successful in in the first run
at it. And, you know, that was the
second time after Harbinger thatit had happened now.
So yeah, I think it's a sort of super interesting like quirk in
the in the story that the Aussieinvestment community wasn't

(01:19:00):
really along for the ride. So to be clear, it's not signed
and delivered. It's contingent on financial
close or if you need to get the rest of the money together.
They need to get a minimum of US$2 billion by the end of the
year for that money to come in. OK, so that leads to the big
one. There's a there's a clock
ticking now. The clock is ticking.

(01:19:21):
They've got to hit the debt markets.
Yeah, 100%. And this is where I'm going to
actually play a snippet from an FMG video because I think the
way they capture it is so good. But they secure $2.7 billion
from a bond offering. It's just, it's just like
immense. There's not too many more ways
you can, you can put it like, I think reading all the

(01:19:41):
announcements 20 years later, it's still kind of barely
believable and you can still kind of doubt that they're going
to get it over the line and thatthey're going to get this thing
built and everything. But yeah, they, they raised $3.2
billion all in with the Lucadia money coming over the line.
So 2.8 ish is in debt, $400 million in equity, less than 10%

(01:20:04):
dilution along the way for a company that was kept at $2.3
billion before the financing. Why this is so like, absurd and
amazing? Of course it looks kind of not
not that way in hindsight, but. But.
OK, The the the, the Chinese steel makers they've they've
literally already reneged on a commitment, right?
There's there's already saying like this.

(01:20:25):
No, we, this isn't binding. We're we're, we're not, we're
not, we're not providing this finance the way the restructured
so that all they've got at this point in time presumably is
actually just like, you know, a,a prepaid that we're going to
take tons. But the entire investment
community, including the debt markets, must be thinking like I
I don't believe that you've already, you've already shown me
that you're not here for your word.
Like I don't how am I supposed to believe that, you know, any

(01:20:46):
of your commitment here is actually going to be like
credible and and certainly upheld in the court of law.
It's you're taking an enormous risk as a as a that they're.
Going to sell the product. That that the steel mills are
going to buy it, right? Like they've said they're going
to buy it. They said they've already, but
they've already, they've alreadyshowed that they're not, you
know, like going to uphold a contract.
I I think that risk is actually mitigated because the, what I

(01:21:07):
mean the deal that fell through was with like a China rail,
China met and China Harbour. They have signed heaps of mois
which became sales contracts around this period in time with
steel mills and they, they wouldpretty much spoken for up to

(01:21:28):
45,000,000 tons. And in short order there was
demand beyond. I think the investors could see
that the demand for iron ore wasgrowing gangbusters.
There were so many steel mills coming online.
These, you know, if they weren'tall sort of solid yet the, the
sales contracts were becoming solid and that was diversified

(01:21:49):
across, you know, dozens of steel mills that, that wanted
product, you know, big and small.
So I, I think, you know, just seeing the way China was growing
more broadly, investors were at ease that no matter who it's
coming from, there will be demand for this iron ore.
Gotcha. Like certainly risk.
Like certainly a whole heap of risk going with it in a

(01:22:12):
massively sort of crammed in time frame.
Should we play the video? Let's play the video.
Unfortunately, when the bond rating did come out from
Standard and Poor's and it was very late one night that we
heard, so it would have been early Australian time, late New
York time. The number or the the rating

(01:22:32):
that they were giving us was 2 levels below where we thought we
were going to be. And I remember going to bed that
night and it was probably midnight thinking I'm dead in
the water here. You know, the company's dead in
the water here. This is not going to happen and
everybody's going to walk away from this.
They wanted to go different to Moody's because they're
competitors and we will be the sacrificial lamb in that stupid

(01:22:55):
game. And secondly, they're being
fundamentally lazy and looking at the strength of the
proponent, not the strength of the project.
In which case the mining industry could only be developed
by the existing players. And if, and I explained, if you
propagate that process, the mining industry is going to die
and you will pay so much more and your children will pay Even

(01:23:15):
so much more and your grandchildren will pay an
astronomical amount because you didn't write mining companies
projects on the strength of the projects, but only on the
strength of the company. And that means the whole world's
mining industry, if left to you,will only be run by BHP, Reon
Valley. And they'll set prices at
whatever they like and control supply because you established
their monopoly. That's well, can you put any

(01:23:37):
more money into the project? That's yes.
If you give us the double B rating, we'll put it in another
100 million. But you've got to say yes or no.
Now it's, it's getting on. We're going to wake up tomorrow
morning to the press that you gave us a single V and that this
project's dusty. And so the lead guy said done.

(01:24:01):
I woke up very early the next morning, maybe 6:00, went
straight down to breakfast, and there's Andrew sitting there
looking very chipper and happy that he was feeling pretty good
about the world. And I said, why are you so
happy? This is not good.
And he said, well, we've managedto get the bond rating that we
wanted. I said, what do you mean?
And it turned out, as I discovered later, that he was up

(01:24:24):
all night talking to Citigroup, talking to the standard poors,
and he managed to talk them up two levels during the evening.
And I remember the Citigroup guysaid.
I've seen bonds talk up one level before, but 2 levels is
just unheard of. We.
Went through a billion fairly quickly.
We got up to 1.5 and then everything slowed up and we were

(01:24:45):
really quite nervous about whether we were going to get
there and they were due to closethe bond within within an hour
or two. So Andrew managed to to pull an
ace out of the hat. He went to Plan B.
He called a certain person and he said, well, what do you need,
Andrew? And Andrew said, I need you to
guarantee that you'll put $150 million into this bond issue if

(01:25:08):
we need it. And there was a silence that
seemed like forever, with our hearts beating hard because we
knew we were playing our last card.
And he came back after what I thought was forever.
It was probably 10 seconds, and said, Andrew, I'd be happy to
help you. So we looked at at the Citigroup
guys. They looked at us and within
minutes we were watching the bombs be posted and, and ramping

(01:25:31):
up towards $2 billion. And within a couple of minutes
we were ringing the bell becausewe're over the top.
We were just over $2 billion. It would have been about 3:00 in
the morning. The text came through to say
we've done it. You know, we've closed it just.
And I mean, it was close. We just sort of rolled over that
line and they just, and there was a real sense of euphoria and

(01:25:51):
you could get it across the linefrom the people in New York.
You know, I literally could feelmy heart inside my body jumping
up and down at that moment. God.
Isn't that something? How cool is that?
Wow, wow. I talked, he talked the bond
ratings out too, not just. That's fantastic.
So, So what they signed was debtthat would mature over 5 to 10

(01:26:15):
years, a a few different sort ofbonds.
They would be paying around 10%.And from this point in time,
the, the share price just goes parabolic if it hadn't already.
They sort of see it fly to 13 bucks and then it just goes
beyond, oh, oh, put a little chart there.
You don't compare it again like for like, but you can just see

(01:26:35):
exponential sort of chart and itjust sort of goes flying.
This is this is, you know, the one of the biggest bit of
uncertainty is, is financing. Well, there's there's more
uncertainty to come on. I've got no doubt but this, this
is an inordinate kind of, you know, capital raise.
And a lot of people were probably thinking there's going
to be a lot of dilution to the equity in, in the, you know, the

(01:26:56):
pursuit of the development here.All that's gone because yeah,
got enough money now. Fantastic.
So late 2006 everything just clicks into gear.
They move to doing monthly construction updates.
So you can like sort of putting picture next to picture next to
picture see in sort of slow motion that the the thing's kind
of getting built. Contracts are rewarded non-stop.
The initial CapEx at this point is call it sort of $2.6 billion

(01:27:20):
that kind of break out infrastructure and and mining.
In a way, Twiggy puts the clock up in the East Perth office that
is ticking down the days to 1st or and it's ticking down the
days to revenue. More importantly, with February
2008 being the goal and things are just gangbusters.
And this is the point in time where Twiggy mentions that
they'll do an expansion study for 100 million tons per annum

(01:27:42):
while they're at it. What is what's the perception of
of Fortescue at this point? Just like what's, yeah, how how
is the company received? How's how's how's everyone
thinking about the probability this is going to be a real
thing? I think you could sort of safely
say that there was a lot of doubt.
Like there's this famous or infamous quote from an Aussie
fund manager saying, you know, I'd be happy to be strapped to

(01:28:05):
the railways in early 2008 because I'm not going to be run
over by a train. There is skepticism throughout
the market that it's sort of, and obviously that sort of
changes in part, you know, financing is a, a big hurdle
there. I mean, there's, there's not
many backers in the, the Aussie market.
Charlie Aiken was was 1. He wrote the famous note.

(01:28:25):
Build it and they will come. Build it, yeah, Yeah.
So I think that was sort of 2007type time frame and he was sort
of cottoning on to the point that no one else in Australia is
is getting behind this thing and.
After Twiggy, you'd been barraging him with phone calls
to come check it out, come checkit out, come check it out.
Don't doubt it. And I'm sure he didn't want to
fly over to Perth, but when you did, yeah.
Yeah, so I, I, you know, changesin time and the, the, the

(01:28:49):
warmness in, you know, receptionjust day by day changes to the
point where diggers and dealers in 2007 and there's not enough
seats, you know, they have to lock the doors because everyone
wants to just get a glimpse of Twiggy.
So, you know, people, people in their sort of perception can
change. And he he did a hugely

(01:29:11):
impressive job in in changing that by kind of forcing this
thing. Through but this bit here when
you've got the money and it's all systems go.
This is when like the, the, the,this, the feel around that
company because you have to mobilize an inordinate amount of
people who are, who are, who are, you know, now given an
extraordinary amount of like, like autonomy and leeway to, to

(01:29:33):
go do something that's never been done before in some ways.
Yeah, yeah, 100%. And there's actually one
approval that they still need, which ends up delaying the
project a few months. They need to get approval to
build the rail through this areaknown as Woodstock Abbados.
And this was a, a protected areafrom any sort of development

(01:29:54):
under the Aboriginal Heritage Act going back a little way.
So Twiggy made the case to the, the sort of relevant minister at
the time that they would need toreroute the, the train that
would add years and, and true Twiggy stars sort of said that
would kill the project. You know, I think other people
debated that at the time, whether, you know, could they

(01:30:15):
just reroute it around this area.
It, it was an expansive kind of area, but what they wanted to
carve out was a 200 meter strip through which they could run the
railway for a nearly 60 kilometers.
So it's a fair chunk of land politically, nobody, you know,
as an individual wanted to put their name to approve this thing
because it was a bit of a a hot potato, hence the the delay.

(01:30:36):
But in a classically extravagantpitch, Twiggy makes a statement
that he'll sort of strap himselfin front of any aboriginal
carvings along the way for when that they're these sort of
blastings take place. And they make the the promise
that they will use non and non explosive blasting methods to
carve the the path that the railway can be built on.

(01:30:58):
And who knows whether he actually did that, but that was
enough to get the deal done. And they get the approvals in
late 2006. And this is where construction
starts in earnest. They're off to the races at this
point and the clock is ticking and they have pulled in that
time frame that they want to build the thing into under 18
months versus the 22 that I'd mentioned earlier.

(01:31:18):
Under 18 months to build the entire rail and obviously all
the minor informations. And the port and the port dredge
the port. They started dredging the port
actually, but yeah. All of that, OK.
Needs to come together like. If you look, I haven't thought
about the port yet, Yeah. If if you look at the Port
Hedland from Google Maps like it's it's like marshland and
like it, you know, hence the youknow, the building of a deep

(01:31:42):
water port is the blocker for a lot of iron ore hopefuls out
there. Port Hedland is this one nook
where BHB ship a lot of iron oreout of and they build Anderson
Port, which is just on the the other side to BHB and they they
dredge the channel that they need to do, but that's an
expensive task as well that needs to get done.

(01:32:04):
They are also iterating on that component we spoke about before
getting the products that they can actually sell.
And it's kind of probably betteranswers your question before in
a in a way as well. They're continuously working
with the steel mills. They talk about high grade
product, they talk about super value product.
They end up using this super values product that they have

(01:32:26):
and they go a step further and create what they call FMG rocket
sinterfines. Now this is essentially 75% of
the, the rum is good for it goodon spec 25% will be sort of
flushed through the the D sand part of the processing part that
I mentioned earlier. It's sort of through a washing
facility. And then a portion of that might

(01:32:46):
need a bit of gravity separationas well.
And bang, you have your magical product, Rocket Center Fines,
which is named after the the rapid speed, you know, the the
rocket speed that it burns at inthe sintering process before you
put it in the blast furnace. So there you go, you've you've
solved that one. Solved that one.
The the year of the golden Pig market cap through 4 billion

(01:33:08):
dollars 2.8 billion in debt ironoil price jumps again and then
there's a a really tragic and anawful event that hits this
cyclone hits Cyclone George and it wreaks havoc over rail camp
one which is 100 kilometers to the South of Port Hedland 2
fatalities occur over 700 peopleare evacuated from the pilgrat

(01:33:31):
down to Perth. It was the most powerful cyclone
to hit the area since the 70s. And obviously that's a shocking
experience for everyone involved.
And unfortunately in the, the construction process, a
contractor would die in 2008 as well in an accident there.
That sort of awful events that would have affected the the
whole team undoubtedly with regard to the, the cyclone

(01:33:55):
remobilization happens over the space of a, a few weeks.
It does push the whole project out and I'm, I'm sure everyone's
quite shell shocked after that. It adds significant cost as
well. I'd heard numbers about $100
million CapEx is sort of upstated to $2.9 billion.
And yeah, I'm, I'm, I'm sure this is just a incredibly tough

(01:34:16):
period in, in March of 2007 for the, for the whole organization
bit. Bit by bit, they sort of regroup
and, and, and get themselves to together and, and start sort of
building again, getting the teamswitched on to, to expanding the
project, expanding on the the previous kind of expansion

(01:34:37):
attempts, which I think is a a bit testy with a, a few people
out there. I mean, they're not even halfway
through building they're 45,000,000 ton per annum
project. Not a single ton has been
shipped. So I think you can imagine the
expansion plans at this point intime are, are are ruffling a few
feathers. But the company gets through
this, this point in time. And the I think that the sort of

(01:34:58):
focus comes back in sort of mid mid 2007 after those kind of
events. And they, they, they capitalize
on the, the stocks love in the, in the marketplace and actually
do a capital raising at an astronomical valuation.
So they go on to raise $500 million in, in this point in

(01:35:19):
time in 2007 dilution of 5%. So they were a $10 billion
company. Yeah.
Lucadia maintains their stake. JP Morgan works as lead manager,
but BHP terminates their relationship with JP Morgan.
After Really. Yeah.
Yeah. How good's that?
Oh my God, yeah. And wow, I think, you know,
looking back, this was a fantastic capital raise to get

(01:35:42):
done, 500 million at this point in time.
They, they get, they're paying interest on, you know, pretty
substantial quantity of, of, of debt.
You, you want to have a bit of, a bit of breathing room at the
exact same time. Yeah, yeah.
The spending is through the roofduring these, you know, final
stages of construction. The stock goes on to run to
$60.00 a share. It is at that point in time the

(01:36:02):
29th largest company in Australia. $60.00, which is
equivalent of $6 in today's yeah.
Yeah. So in December of that year they
do the stock split. Aussie dollar is powering up at
this point in time. For a bit more context, BHB
makes it's play to buy or to merge with Rio Tinto.
So this is this is the golden times, you know, and you know on

(01:36:24):
that one, Twiggy just throw the book at it.
He's like, this is anti competitive.
The the consequences would be disastrous.
But yeah, we're we're at a pointin time in the end of 2007, the
project is 80 odd percent done. CapEx is 3 billion now they've
burnt through or they're factoring that they'll burn
through all the contingency cash.

(01:36:44):
FMG still has a few 100 million left in its coffers and the rail
is the big block and they're just going gangbusters.
They, they build more than 3 kilometers of rail in a day.
Like I, I find that hard to wrapmy head around.
I sort of cycle past the the rail here that they've been
working on for the better part of half a year fiddling on the
sidelines there to to think thatin near Kandasubi there would be

(01:37:08):
built all the way to the city ina day is is hard to visualize.
You know, like it's so impressive.
It's like so impressed by that and they get it done first or on
ship they hit the target. 256 kilometers of rail cloud break
through to port Anderson there $3.2 billion all up, 10 million

(01:37:30):
man hours worked, 330 contracts,420,000 rail sleepers.
Those things on the railway, so many permits, so many people
responsible beyond the one like the team has swelled to 1200
employees, not even including the contractors.
Just imagine that the inordinateamount of things that weren't
even in the public domain, like the obstacles that had to be
overcome, that you know, the relationship dynamics to to

(01:37:53):
manage and and and get past likeso many of the the the the deli
project delivery pieces wouldn'thave even like emerged in the in
the public domain. Absolutely.
And and Twiggy becomes the richest person in Australia the
first time in 20 years. Someone not called Packer is the
richest person in Australia, thethe highest dollar value ever at

(01:38:13):
the top of that list. In July, the project is
officially completed. And to go back to that 22 month
construction timeline like this is super, super important.
Had that been completed in 22 months, they would have finished
the project right in time for Lehman Brothers to go bankrupt
in the absolute gnarliest part of the global financial crisis.

(01:38:35):
So pulling that in and just working gangbusters to get there
was super important. The iron ore benchmark jumps 80%
in 2008. Think about the compounding and
all those other jumps. We'd said from that point it
jumps 80%. It's north of 150 bucks a ton.
Like the cash flow is coming in straight away like a thing to

(01:38:57):
behold. And it was less than four years
from the 1st hole in Cloudbreak to the first ore and commercial
production. That is the infrastructure bill,
everything that is. Mind boggling.
The whole thing is just just remarkable, jaw-dropping kind of
stuff. And in in the fullness of time,
like it didn't, it didn't matterthat the, you know, the, the

(01:39:19):
realizations on 58% were were punitive compared to what was
forecast because my God, the iron ore price just like
covered, covered over all of anyof those blemishes like.
Covered a lot of scenes, yeah. Costs would rise dramatically as
you kind of expect when the times are so good and then they
have to tighten their belt dramatically as well in the

(01:39:41):
years that follow. But that is the that is the
story that is 2003 to 2008. That is hopefully sort of did it
a bit of justice to to capture kind of what what happened
there, because I think it's remarkable.
And the journey beyond that is like so, so interesting learning
what happens in the years following.
You could chat for hours about it, but I think there's a number

(01:40:03):
of of lessons and I'm keen to chat through this with you mate
to like to pull out what kind ofstands out the thoughts that the
themes because you know there's.There's there's more than a
handful to to speak about here. We've got to got to start with,
you know, the obvious 1 and that's just the, the, the
entrepreneurial kind of story that's underpinning all of this.

(01:40:23):
Yeah, like never taking. No, like nothing is not
achievable. And that's not just like Andrew
Forest. That's the the whole kind of
team. You know, I, I gave the little
anecdote about the, the marketing team going to China
and not taking no, but there's this great snippet where Ayman
Hannan, one of the G OS, the sort of head of exploration, is
sort of speaking and saying, I would not have a single person

(01:40:46):
out there on site that didn't think it was a foregone
conclusion that we were going todiscover the awe.
That stuff is incredible. That attitude is like, you know,
you can kind of feel it and you know, with Twiggy himself, it's
it's kind of clear as day. Everyone knows the energy and
the salesmanship on that part, but it built through the the
whole team and people that weren't believers weren't along
for the journey. They just wouldn't be a part of

(01:41:08):
it. Another theme is like the, the
learning from the past lessons. So we we spoke about what they
did with the, the, the contract.That's a that's a massive 1.
The, the thinking about debt like didn't change massively.
You know, still still a big fan,but utilize and did the equity
raising at a phenomenal time, like took the cash when it was

(01:41:32):
there. And that was that was a very,
very smart decision in in hindsight.
Another one of those lessons is that like Twiggy wanted control.
He has had 35% plus of this company since day dot
effectively. And he didn't want to be pushed
out like Anglo were able to do in Glencoe and stuff were able

(01:41:53):
to do in the early 2000s. And that it's not going to
happen when you've got 30 plus percent of the company.
He wasn't even willing to to forego, you know, a minority
stake in the project, like the equity in the company and the
and the and the project. It was non negotiable.
Like he didn't even didn't even resort to, you know, selling
down the rail in due course whenthings would would ultimately

(01:42:13):
get fragile again. Yeah, all everything was
retention of equity at all costs.
Yeah, it's sort of all in kind of stuff comes off the
entrepreneurial kind of component.
You mentioned they took a a different approach to the
assumed knowledge that was in the industry in so many
different facets. The the mining machines, you
know, coming up with a new geological model for how these

(01:42:35):
ore bodies would sort of exist in the pilgrat the processing
front, the marketing front, the rail, you know, the the heavy
sort of hole using the US bond market as opposed to going to to
banks in the the more commercialkind of split like that.
That is a handful, but there is there's so many more that you
can sort of speak about from like all handling rail
unloading. There's a whole bunch of these

(01:42:55):
innovations that they came up with that would were different
to the pack by by necessity in away to to like the company
didn't have Adna to start with. That's what's kind.
Of like also fascinating about it's not an established company
that had to build its own identity in like it goes from a
shell to, you know, an, an iron ore producer that built a port,

(01:43:17):
a rail and discovered a mine allin the space of five years.
Like, like it's, it's, it's, it's a, it's a true start up
competing with, you know, incumbent giants.
And, and I think like there's, there's something about the
Australian culture as well that when the like, when, when the
chips are against you or where, where it feels like you're the

(01:43:38):
underdog, it's, it's actually somuch easier to dig into the
gritty part of you that wants toprove everything wrong.
And I think Twiggy like as a, asa a type, the type of leader he
is, he's so good at tapping intothat as well.
I've got no doubt that the people I thought it's good to
have worked like absolute dogs during that period of time.
But they would like, you know, Twig, I'm sure Twiggy had the,
you know, had the part of him that could speak to that, you

(01:44:01):
know, desire. And you tell them you're
building the Sydney Harbour Bridge here, you know you're
building something iconic in. National interests, Yeah, yeah,
yeah, 100%. That is phenomenal.
And the culture part is really interesting because I like, I'm
always of the view that the founder sets the, the culture of
a business and the culture of the business is the founder
replicated. Like I think that is, you know,

(01:44:23):
you see that case in point throughout kind of history.
I think the Northern Star narrative is, is similar.
And you see it so often because they hire people sort of like
them or people that they think can do the job in the way they
want the job to kind of get done.
And that reads itself through the the company and it worked
massively to their success. And it's certainly not for
everyone, but it worked in this case.

(01:44:44):
You talked about the past like Anaconda being informative.
There's at the core like. There was, there are a lot of
like logistical hurdles to overcome, but the processing
component of this was much simpler, like the logistics
enormously more complicated to solve.
But that's a, you know, game of scale and financing and and
execution. But, but the, you know, there's
less reliance on the, the, the, the processing methodology here.

(01:45:07):
Yeah, like you said, I don't want to be anywhere near an auto
club and. Then then there's another.
Another reflection I was having as he was speaking was like,
where the hell did he get the foresight from that China was
coming and that this was a huge thing.
And I, I've got to like move in a big and bold way.
Like when he took that year off,did he go to China?
Like who was he? Who did he get this?

(01:45:27):
Like where did all that come from?
All I could find is that he'd gone to Europe with his with his
family. He would have been reading.
So I think there's a a few different facets.
I don't know what actually like gave him that inspiration.
Maybe he's just sort of speakingwith people and it kind of came
about organically in that way. The other part of the story that
we mentioned earlier is that themajors weren't doing any

(01:45:49):
exploration and that that was the opportunity.
And yeah, I mean it, it is hard to sort of put your finger on
exactly. I'd love to to kind of hear
that. But it speaks to the broader
point of the whole theme of China in this story, like the
iron ore price and the insatiable demand steel as China
develops is the the sort of theme that runs through the the

(01:46:12):
whole story here, the the Super cycle, as everyone kind of calls
it. And he certainly drew a lot of
attention to that. Like I know it goes from 30 odd
bucks to nearly 200 bucks in a time when supply is also
exploding. Like yeah, yeah, you've.
You've also got the the steel mills that are wanting to break
that oligopoly. They don't want to buy from like

(01:46:33):
BHB, Rio Tinto and Valley. And I'm sure they were even more
scared at the idea of BHP and Rio Tinto merging than Twiggy
was. They were terrified that they
could price the, you know, the iron ore at whatever they
wanted. So that that sort of ran right
through. And that's why they're happy to,
to work with FMG if they could kind of get it, get it together.

(01:46:54):
So I also think there's a kind of nuanced point on this that
Twiggy's way of doing business was much more attuned to the
Chinese way of doing business than the Korean or Japanese way
of doing business. So I haven't been to China Love
to go, but from what I've heard,this directness worked and sort

(01:47:17):
of drived in much better with their sort of style of business
than the much more formal approach in Japan where you have
to form relationships over a long period of time.
And you know, Japan and then like later Korea, they were the
iron ore, they were the steel market when you know, the early
iron ore mines were built. So this project could not have

(01:47:37):
been built in any other five year period of time than the
five year period it was built in.
And that is a combination of theright macro settings and the
right people up for the job. And that beds in with the idea
of were they lucky? Because you always hear people
say like, he was just lucky. That's why he's the richest

(01:48:00):
person in Australia. And I don't know how you can
sort of hear the story and, and think that because his skill set
was so uniquely suited to, to what he did.
And yet other people made a lot of money from the the commodity
boom and from the iron ore market.
And there's all the, the bigger kind of luck with these

(01:48:20):
entrepreneurs that he's born in the settings he was born, all
these kind of things that you have to take for granted.
Lucky's word preparation meets opportunity 100%.
And he just grabbed that opportunity.
And didn't let it go, so the. The Yeah, the the story of
Northern Star that. You, you told her a couple
months ago and that was a, that was a, a story of phenomenal

(01:48:41):
value creation through like savvy, savvy deals, effectively
very savvy deals, like tremendously savvy deals.
This is a story of like incredible project execution
against all the odds. Both of them, both of them had
the backdrop of a, of a commodity boom over the duration

(01:49:01):
of the, you know, the, the building of those companies, but
you need that. But if you don't have the
execution or the, or the other part, then it doesn't come
together. Absolutely.
And the the thinking big like they thought so big.
From the beginning, like they didn't want to be a 1520 million
tonne per random player that would be beholden to someone
else's railway, because that's what you would be if you're not

(01:49:22):
of scale. They thought enormous and it was
all or nothing. The barriers to entry were
enormous. Like you had to build a port, a
rail, find the. Deposit that wasn't already
hoarded by the incumbents like it's I just think of it yeah,
more challenging like barrier toentry to and it's capital
intensive like when you think about like businesses around the

(01:49:43):
world all different shapes and sizes like.
These are some of the biggest barriers to entry in business.
This isn't a tech startup, you know, overcome by a shell.
Yeah, yeah. Just is incredible.
You got to touch on the. The national interest part as
well, both the FMG logo and the Anaconda logo were an outline of
Australia and that's fine. Just tapping into and, and

(01:50:06):
Twiggy would sort of associate it, brush shoulders with John
Howard and, and the like. That actually reflected well
overseas when people would see photos by association.
You think, hey, this guy's mateswith John, you know.
So whether there's any sort of truth in it is a is another
thing. Having the office in East Perth
away from little things like that, that, you know, at

(01:50:28):
lunchtime you're not going to see your mates at BHP or
anything like that. They're all isolated in, in a
little way. Twiggy sold a bit of stock in
2005, didn't sell the the rest of the journey really just sort
of. And that's been the case even
more later on, like after this he, he goes on margin and buys
stock. Like the dividends have been
tremendous. Yeah, they have been.

(01:50:49):
There's so much of this. Like story that gets left out
just. I mean, you have to.
Focus on on part of it and but do you do you think the
formation is is is more important than, you know, what
would ultimately kind of kind ofbe the rest of the story that
comes later because they they experience tremendous
vulnerability. And in some ways, you know, you
talk about luck again, like the valet tailings dam disaster, you

(01:51:11):
know, is a is a pretty lucky, lucky phenomenon that will occur
in fortescues later. Yeah, periods too.
There's so many moments when they when they came to the brink
again, like we were chatting about the other day.
When they're, you know, stripping ketchup out of the,
the shell, there's no knives andforks and cutlery in the offices
or anything like that. They've gone down to the bare
bones. So yeah, the, the, the rest of

(01:51:32):
the journey is, is fascinating. And you, you reflect on other
parts of like how they were thinking about the business
earlier, like Open Access infrastructure.
They were begging to get on BH BS line.
They would not let anyone get ontheir rail line, that's for
sure. So that's something you just got
to kind of laugh about. They yeah, they're not they're

(01:51:54):
they're probably a pretty protective of their.
Own infrastructure these days not a charity.
Certainly a question. Yeah, I think the the last kind
of question I. Want to put to you.
Mate is what do. You think would have happened
otherwise? I think this is a a really
interesting way, way to to thinkabout the story.
I don't think this gets built like yeah, I it's, it's often.

(01:52:15):
Hard to say that in, in, in almost any, you know, industry
or whatnot. If you remove, remove the
founder, remove, remove the founder.
Like I don't think, I don't think these projects get
developed. I don't think we have, you know,
with a third pager exporter of iron ore out of out of
Australia. I don't think you have what
would ultimately prove to be like how much tax have they

(01:52:36):
paid? Like over, you know, corporate
tax and the likes. How much GDP has this company
generated? It's like it's phenomenal.
It's inordinate. How many individuals have earned
a salary from Fortescue? Crazy.
But I, I, yeah, I, I think the, the, the.
Like I can't think of an anotherindividual like an and and

(01:52:59):
Twiggy doesn't take all the credit.
I'm sure the the team takes an enormous amount of credit.
But if you pin it all back, if you remove Twiggy from the
equation, I can't think of another individual that if they
weren't there for that moment is, is responsible for so, so
much like GDP opportunity cost, like tax revenues for, for, for
the country, for Australia, go Australia, then go Australia,

(01:53:20):
then Twiggy. I don't think that's an
appreciated kind of part of partof the story either.
I, I think you're right and that, and that's part of the
reason I found it interesting totalk about this because.
You know, he he's a man that everyone you know that how many
negative articles have been written about it And obviously
there's there's there's flaws with the character like any.
But I think it's worth celebrating in in that regard

(01:53:43):
because the the value creation, which obviously he benefited
from tremendously, but many other people did so well from
and Australia did phenomenally well from you know, is a is a
hell of a story. And yeah, maybe if this doesn't
get built, iron ore would have been even more expensive.
Maybe projects bit by bit get developed in other parts of the

(01:54:05):
world. But would this have been like
discovered? Like, yeah, in the matter of
time, but maybe still not to this day.
You know, maybe that's somethingstill down the down the track.
I don't think anything close to this would have happened if he
hadn't sort of catalyzed it. Totally, mate.
Like I'm in complete. Agreement on that front.

(01:54:27):
I think it's a the greatest story of value creation that's
ever existed on ASX. Like from from nothing to a
Titan, who would have thought you could become like a truly a
true, a true major in that in that sense of a, a mining
company in the space of, you know, like 2020 years.

(01:54:47):
It took them a lot less than that.
But it's a it's crazy. It's crazy to think, yeah, it's,
it's significant. Like it's incredibly significant
across the the. Whole Aussie business sort of
landscape like there's, there's obviously some wicked, wicked
companies and heaps of differentstripes out there, but just an
incredible story and I the otherbit too there that like we, we

(01:55:07):
might have touched on, it's justlike the ability to.
Dust yourself off after after, you know, an absolute
catastrophe from an, an equity sense.
We wouldn't have had much money or anything like that.
Everyone that that putting moneyinto his thing would have lost
money. I'm sure he probably promised
the world in that in that as well.
But just to dust yourself off and have another crack.

(01:55:28):
Like there's a lesson for us as well in like just rewarding the
risk taking of being an entrepreneur because, yeah,
sometimes it's like, sometimes it it turns out great, sometimes
it doesn't. But if you don't get back up and
have another crack, then you never get any of the possibility
of of of tremendous value creation totally.
And like Long Long made the sortof investment community back

(01:55:48):
people like. This because to do that and like
you said, to do it after such a like a public downfall is just
incredible. And it would have been very easy
just to to hideaway, you know. So yeah, I think that's a good
put, good point to wrap a bar onthe episode.
Like this episode came together reading 20 year old

(01:56:11):
announcements. So I'm sure the the
interpretation of a lot of thesepublic releases might have been
a bit off. And there were bits that were
abbreviated and and kind of missed along the way as well as
stuff I'm I'm sure I just got wrong.
So happy to be corrected on a bunch of that.
But yeah, like some wicked sources out there that FMG put
up some some books written on them, like the the Twiggy book

(01:56:33):
is a really interesting perspective as well.
So many news articles across alldifferent bits of media from the
AFR, the Australian, the West, the The Morning Herald and, and
all those sorts of things that that sort of helped it kind of
paced together and they, they all sort of deserve sort of
credit for, for writing the story along the way.
But yeah, what a what a story itwas, mate.

(01:56:54):
Go Australia. Go Australia.
Shall we watch the Go Australia?From Turkey, Yeah, that's great.
Yeah. Go Australia now, remember?
I'm an idiot. JD is an.
Idiot if you thought any of this.
Was anything other than entertainment.
You're an idiot and you need to read out a disclaimer.

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