It`s just the beginning

Volume 1. Issue 164
$9.95
August 2009
Australia’s Paydirt
August 2009
It’s just the beginning
ISSN 1445-3436
07
9 771445 343007
• Tony Sage: The man behind the myths
• Diggers & Dealers: Special edition
• Victoria: Rediscovering itself
cover
The right people, the
Andrew Forrest, left, and David Flanagan shortly after the signing of their companies’ infrastructure agreement. Playful Flanagan decided
to wrestle Forrest for this picture, signalling the end of two years of hard bargaining
For four years, Paydirt has reported on the developing story of Atlas Iron Ltd, from its $4.5 million IPO
through to the dispatch of the first Panamax vessel taking Pardoo iron ore from Port Hedland
to its buyers in China in December last year. (This coverage has spanned 20 editions and 33
pages of Paydirt between 2005 and 2009.) From zero to hero, it has been a remarkable story
of deals, growth and production. And the march continues: In the words of managing
director David Flanagan: “Where we are right now is just a drop in the ocean.” For this report,
Paydirt editor Barry Avery asked Flanagan about the people, the influences and
philosophies which have catapulted the former junior company to its current status
Page 14 august 2009 austRaLIa’s PaYDIRt
right time, the right stuff
“A
ll of this is about our kids. The whole
purpose of what I am in Atlas for is to do
something, ultimately, that we are proud of. And
that our kids will be proud of.”
At age 37, Bunbury-born Flanagan should,
indeed, already be proud of what he and Team
Atlas have accomplished during the years of
the biggest boom – and the biggest bust – in
the history of mining.
Flanagan is intense, passionate, engaging, entertaining and playfully wayward with
a wicked sense of humour. An hour in his of
office in storm-lashed Perth at the end of June
went by all too quickly, he’s a great story-teller
who infects one with the ample enthusiasm
he has so clearly shared in abundance with
the women and men with whom he works. He
quickly deflects the idea that “Dave-Flanaganis-Atlas” to stress his company’s rise has been
as a result of multiple, diverse inputs from both
within and outside of Atlas.
But the story always starts with the quest of
a single individual. In the case of Atlas, it began with 15-year-old David’s decision to give
geology a go for work experience. His mate’s
father, Chris Davies, was the exploration
manager for Cable Sands.
“I liked it from day one, I decided to be a geologist there and then.”
This rolled into repeated vacation work before he enrolled at the School of Mines in Kalgoorlie.
He admits he was not exactly a “red hot student” as a disproportionate amount of his time
was focused on what he euphemistically calls
his “social development”. This, in Flanagan
style, was pulling pints in Kal’s pubs and working underground at Fimiston. “They were wonderful jobs. But boring out the face and firing it
is, for a 19-year-old, pretty exciting.”
Before he graduated he had already been of
offered a job by the Rick Yeates-Julian Barnes
RSG (now Coffey Mining Ltd). He was seconded to Andy Viner at the Mining Corporation
of Australia where “I absolutely got a smell for
what could happen in exploration. I was there
for 18 months and absolutely loved it”.
He returned to the Superpit as a production
geologist and found that it lacked the spark
that had entranced the teenage David.
“The big company thing was not really
pressing my buttons, so I went back to RSG
and they pushed me all over the place: Eastern
Goldfields, Indonesia, West Africa.”
It was at Bogasu gold mine in Ghana that
the 25-year-old Flanagan, for the first time,
was pushed well outside of his comfort zone.
Working in tandem for RSG and Gencor
(which became Billiton while he was there),
Flanagan controlled a 100-man team and
was in charge of a multi-million dollar budget.
He was responsible for exploration on all the
leases. “I was completely unrestrained in my
ambitions. There was a (corporate) belief that
David McSweeney
David Hannon
there was no more gold to be found, and they
were preparing to shut the mine in 1997/8. So I
ended up with a lot of freedom and worked with
a group of really good Ghanaian geologists. I
let them go for it and we found heaps of gold
– and the mine is still running today.”
Flanagan had the full African experience
in Ghana, with a bout of blackwater fever and
a couple of run-ins with the dreaded cerebral
malaria. On one occasion, when it was feared
Flanagan might suffer a burst appendix, he
was warned that he presented a “death risk”
on the flight to hospital.
“That was pretty frightening, being told that
you might not make it,” he muses.
A big shift in direction came when Flanagan, after his two years in Ghana, came home
to work for Gindalbie Metals Ltd, “and it was
just brilliant getting to work with David McSweeney, a classical lateral thinker”.
McSweeney appointed Flanagan exploration manager and his main focus was on the
Minjar gold mine, which was battling high costs
and a low gold price.
Flanagan said it was a great learning experience. He recalls his School of Mines lecturer
Andrew Paterson
David Nixon
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austRaLIa’s PaYDIRt august 2009 Page 15
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Daniel Taylor
Denis O’Meara
Rick Revelins
Max Wearne telling the geology class that if
the students ever had the opportunity to work
on a marginal mine, they should jump at it.
Wearne had said that it was likely that geologists would get 10 times more experience out
of a difficult mine than they would from one
which was “cruising”.
“At Minjar we would sometimes struggle to
stay alive week by week. From this, you learn
a lot about mining and leadership – but even
more importantly, you learn an enormous
amount about people in general.”
Flanagan recalls that McSweeney often
gave him “strange books” to read. “He would
just lump a quantum physics book on my desk,
and say ‘have a read of that’ or a book which
contained the letters from the British economics advisor to the Australian prime minister,
advising Australia on how to gear itself up to
support the mother country – as opposed to
creating its own independence. He gave me
lots of history books, including the ‘Wars of the
Roses’. There were lessons to learn in all of
them.”
One of the books that McSweeney dumped
on Flanagan’s desk was “The Alchemist” by
Paulo Coelho. It was another turning point. “I
resigned after reading it,” he laughs “not because I was sick of David McSweeney giving
me books, but because of the three messages
contained in that book.” The first was that if
you get out there and really have a go, things
conspire to help you achieve your desires.
Others will join in the charge down that road.
The second, Flanagan said, was that sometimes you don’t have to look too far to find what
you are looking for. “It can actually be right in
front of you; the classic case is the fact that
there are still opportunities here in WA – and
they are enormous. I don’t necessarily need
to go overseas, there’s expertise right here in
West Perth, there are people right here who
will back you.” The third message contained in
“The Alchemist” was the fear of failure: What
might go wrong often plays on your mind and it
becomes bigger and worse than it actually is.
“It was then I decided to leave Gindalbie and
go and list Atlas. A few people had said they
would be prepared to back me, and I believed
that I would never really know how many backers I might have unless I went out and did it. I
phoned lots of people, had lots of cups of coffee.”
Some of those people included many of
Australia’s top businessmen.
“They all gave me bits of advice. One useful
piece of advice came from the chief executive
of one of the largest gold mining companies in
the world. He said to me: ‘David, don’t worry
about what you don’t know, just know what you
don’t know, and surround yourself with people
who do. As long as you don’t try to be an expert in everything, you are half way there’.”
“Lots of people will answer the phone and
David Archer
Garry Plowright
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Page 16 August 2009 AUSTRALIA’S PAYDIRT
Tony Walsh
give you advice for free. It started off with older
guys who I knew had graduated from the WA
School of Mines, many of whom had done well.
I told them I was starting Atlas and I want to
build it into a reasonable company. I asked
them for advice – and sometimes it was just as
simple as that. Often, two hours later I would
still be listening to them and they would then
buy me lunch. It is almost like there is a whole
resource out there that people haven’t tapped
into, because they have not asked.”
Advice even came from potential competitors, and some of the “really good people within BHP Billiton and Rio Tinto. Sam Walsh once
had the pleasure of sitting next to me on a flight
to Hong Kong ... that was pretty interesting”.
Kicking off with Atlas, one of the key people
that Flanagan called on for help was iconic Pilbara explorer, Denis O’Meara (De Grey Mining Ltd).
“He is a wonderful bloke, very understated
in his knowledge of the Pilbara, along with the
relationships that he had built up. Denis has
forgotten more than anyone else has known
about the Pilbara. He has always been a supportive shareholder.” Along with O’Meara,
Rick Revelins was another early-days supporter who was the first chairman of Atlas.
Revelins taught Flanagan the importance of
doing deals, even if these deals were not perfect the first time around. More important was
the spirit in which the deal was done.
“Rick’s prime thing was that you should do
the deal, generate value out of that and get
some momentum to roll into the next one,
then the next one ... focus on the parts of the
deal which contain the most risk and the most
value.”
David Hannon, a non-executive director, has also been with Atlas from the outset.
“Dave is an amazing barometer of the market.
He could tell you the sentiment of the market at
any time and this is terribly important because
in your business plan you need to understand
what you intend doing in the context of the
market. You cannot just think operationally,
and you can’t just think of the market. You have
to have a bit of both.”
David Nixon became the next Atlas chairman, and was “amazing” on the subject of
project management.
“He taught me that nearly everything is
project management-driven – what steps you
have to take to get from here to there, and how
you optimise the path while you are doing it.”
Flanagan regards Mark Gunther, Atlas exploration manager, as another of the company’s core people.
“Mark’s personality is just so dry, but he’s a
brilliant geologist and he’s a brilliant grassroots
logistics co-ordinator, it is unusual to have both
these characteristics rolled into one person.
But he also won’t do anything for a dollar if he
can do it for 50c.” Flanagan said with a laugh.
“When we made our first discovery, we were
at Diggers and Dealers in Kalgoorlie in 2005.
When the drill result came in, that celebration
coffee was the last one Mark has ever bought
for me. He can be a bit of a tight-arse!”
Soon after Atlas started up, mining engineer
Ken Brinsden was brought on board. “He is a
legend, he’s just brilliant: Ken will be a major
Jack Cullity
Ken Brinsden
player in the Australian mining industry, I have
no doubt. He will be remembered because
he is going to achieve a lot of things. He just
grabbed Pardoo by the throat and took it from
resource to reserve and executed, built a team,
drove the whole thing.”
(Brinsden is currently the company’s operations manager.)
Following closely was chief financial officer
Mark Hancock.
“What is different about Mark is that he simply ‘gets’ all the issues, understands the strategies, understands dollars and cents, he really
understands the strategic value of all of our assets over time in the framework of where we
are operating. If you can understand all that,
as well as the commerciality of developing our
assets, it is a really important skill to have.”
Then Flanagan plunges the knife in, with a
wicked grin: “Another good thing about Mark is
that when we’re doing our karaoke bit in China,
he makes me look really good. He is just ter-
rible – absolutely terrible – at karaoke.”
Land access and approvals manager Garry
Plowright has, says Flanagan, wrestled the
proverbial gorilla of officialdom to get the company’s mining permit.
“We could not have got it without Garry. I
don’t want this to be seen as having a go at
governmental departments but permitting a
mine is like wrestling a gorilla. It is a real battle, and a couple of times Garry was literally
thrown out of the ring. We picked him up, glued
his ear back on and pushed him back in there.
He has the heart the size of a mountain.”
Jack Cullity is the legal manager who is
able to convert a two-page scribbled “deal”
given to him by Flanagan – and turn it into
the perfect, 40-page agreement. Cullity and
Brinsden were the men behind tying up the
Talison deal concluded in March 2009.
“I think that deal will be the transforming deal
Mark Gunther
Mark Hancock
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AUSTRALIA’S PAYDIRT August 2009 Page 17
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The ‘tenacious
little bugger’
From page 17
for the company. In a few years, we will look
back and that will be the tipping point at which
our company went from ‘good’ to ‘great’.”
Atlas Iron’s eighth employee – he actually
calls himself number eight – was Tony Walsh,
whose moral compass, according to Flanagan,
is “absolutely amazing. It is just so important,
when meeting people, to have a good gut feeling that you can trust them. Tony is very good
at helping us to deal with people who have
similar value sets as ours. Good corporate
governance has really created opportunities
for our business – added to helping with all of
this, Tony has a great sense of humour”.
“Geological consultant Dave Archer is
another of these great geologists, like Mark
Gunther, who can do logistics and execute
projects. More importantly, what Dave Archer
and Mark Gunther have achieved is to identify
a new region of iron ore prospectivity in the
north Pilbara. I regard this as the equivalent of
Mark Creasy going in and finding Bronzewing,
Jundee and the greenstone belt which was believed to not host anything. What Archer and
Gunther have done in the past three years is
find 93mt of ore. And I think they are going to
find another 150mt, and it is going to become
a significant iron ore field. Dave and Mark do
not necessarily accept precedents handed to
them, they challenge everything.
““Jeremy
Jeremy Sinclair is our general manager at
Pardoo, a great bloke who understands mining
and has built the ‘A Team’ on site. Those guys
started a mine and sent off our first shipment
within nine weeks of approval. It’s never been
done before in my knowledge and I doubt it
will happen again. He and his wife Penny are
great ambassadors in Port Hedland.
Daniel Taylor is the 32-year-old marketing
manager who Flanagan describes as “very capable”. In the face of a perfect storm last year
when the company’s off-take partner reneged
on the contract and access to short-term credit
dried up – among other challenging experiences – Taylor was still able to find a buyer for
those first two shipments of ore in one of the
worst iron ore environments ever.
“That second shipment that we sold was the
lowest grade cargo to ever leave the Pilbara.
Taking all this into account, thanks to Daniel’s
efforts we still made money, and avoided selling those cargoes at a loss.
“All of our team are at that right age where
they have energy, experience, and they want
to be part of building something. We did not really want to get people who had already gone
and done it all.”
Partners have played an important role in
the success of Atlas. Flanagan paid tribute to
his wife Sarah, Mark Hancock’s wife Julie,
Tony Walsh’s wife Leanne, Garry Plowright’s
wife Donella and Ken Brinsden’s wife Fiona
who had “all worked so hard for Atlas”. He said
Atlas sometimes required superhuman efforts
from its people and if they had family support,
they were able to perform at their optimums to
achieve these breakthroughs.
– Barry Avery
Page 18 august 2009 austRaLIa’s PaYDIRt
D
avid Flanagan believes that the iron ore
industry is about to move out of the bottom of a 10-year cycle – and that the next
bottom is a decade away.
Right at hand for Atlas is achieving the
short-term aim of getting to 12 mtpa within
three years.
“We still have a lot to do, but I think it is doable. And while we are getting there, we have
a few ‘out-there’ opportunities which are also
in the iron ore game – and they may catapult
us to around 20 mtpa at some stage.”
The Atlas philosophy lies in having multiple parallel strategies working towards the
corporate goals.
“We have done 30 deals since we have
listed and we’d like to think that those who
did deals with us would like to do another
deal, and pass on the message to others.
The more people you have conspiring with
you to succeed, the greater chance you have
of success.”
Flanagan is of the view that a similar pattern of innovation, information sharing and
collaboration which characterised the way in
which gold juniors have operated in Western
Australia will be mirrored in the future of the
State’s iron ore industry.
“No-one operates independently any
more, we’re all interrelated.”
He sees both positives and negatives in
the merging of Rio Tinto Ltd and BHP Billiton Ltd’s iron ore assets in the Pilbara. On
the plus side, he thinks this will be the trigger
for the State Government to review the state
agreements, which would offer opportunities
for Atlas and the Pilbara in general. However, if these majors began “acting in concert,
I don’t know that it would be good for one
group to control so much of the State’s resources”.
Below the likes of Rio and BHP, Flanagan
has had a two-year negotiation experience
with Andrew Forrest’s Fortescue Metals
Group.
“I learned a lot from dealing with Andrew
Forrest. When we had finished the (thirdparty infrastructure agreement) deal, I was
exhausted, absolutely exhausted and he
looked at me and said: ‘Well done, you’re a
tenacious little bugger!”
Flanagan compares dealing with “Twiggy”
with playing rugby with a bunch of “golden
oldies” back at the School of Mines in Kalgoorlie.
“We had a match against these guys, who
were all much older than us. As we were
walking on to the field, they said ‘hey, look
guys, we’re just going to have a bit of fun
today. No serious stuff’. Well, Jesus, on the
field these golden oldies did their very best
to tear us to pieces. And they mostly played
within the rules. But, at the end of the game,
we realised that deep down, these were good
guys – and they did teach us a few lessons.
That’s what it is like dealing with Andrew. On
the field, he plays to win. He has taught us a
lot, even though we did not always like it.
“He’s a very, very clever guy. I have read
a lot of military history, and I reckon Andrew
has too. I remember asking him about something one day. I said: ‘Why did you do that?’
... and he replied: ‘David, it’s just a rear-guard
action’.”
When the Atlas-FMG deal was signed
and sealed, Flanagan wondered what gift
he could give Forrest as a token of appreciation. He pondered what would be meaningful to Australia’s richest man. In the end, he
chose a painting by his then three-year-old
daughter. It was a picture of what she had
named a “Box Rocket”, and depicted in it was
a flaming box, with people sitting in it, flying
through the clouds, passing an aeroplane.
She explained: “A box rocket can go anywhere and do anything.” Flanagan decided
that this was the most appropriate gift for
the head of FMG. Forrest later sent Flanagan a message to say that the “Box Rocket”
had been scanned into his Blackberry as his
screensaver.
“My daughter, now 5, has become central to the first-ever third party infrastructure
agreement in the history of iron ore mining in
the Pilbara.”
A man always prepared to look on the
funny side of life, Flanagan has many such
anecdotes about the Atlas experience:
• An Asian group visiting Pardoo was being
inducted by Mark Gunther, who warned them
of the hazards of the Pilbara. He warned of
flies, bees, spiders and snakes. So when a
fly flew past one of the men in the party, the
visitor froze in terror – as if he was encountering a killer bee.
• On another occasion, Flanagan was
briefing a party of foreigners at Pardoo when
one in the group asked about the threat of
crocodiles at the project, which is only 15km
inland. Impishly, Flanagan could not help
himself. “I said, ‘yeah we do get the occasional crocodile through here, around the
drill rigs and sometimes they annoy the people at the camp. Most of the project is ok, but
let me just check’. I jumped out and checked
around the car ... but only one member of the
group, the chairman, could not afford to lose
face and alighted from the vehicle.”
At the conclusion of the infrastructure agreement between FMG and Atlas, Flanagan presented Forrest with this picture of a “Box Rocket”. Drawn by
Flanagan’s three-year-old daughter, Forrest later had the drawing scanned for use as his Blackberry screensaver
• Before Atlas listed, Flanagan and colleagues went to meet a few of the Aboriginal
groups. After briefing them on the intentions of Atlas, a couple of the elderly women
asked Flanagan if he would take them out
to dinner that evening. “So I did, I took them
out for dinner, it was one of the funniest
nights I have ever had. And as it turned out,
these two women were enormously influential within the communities up there. It went
a long way towards creating good relationships.”
• Mark Hancock and Flanagan had just
completed the deal with FMG in the early
hours of the morning, immediately after
attending Diggers and Dealers. Both men
were exhausted and as they were saving all
the documentation of the previous two years
on Hancock’s laptop, the battery died – and
he had no lead to recharge it. The men were
deeply troubled, as the documentation had
not been backed up. Anxiously, they went
their separate ways – but it got worse. As
Hancock arrived home, he dropped the
laptop on the tiled floor of his kitchen. But
two years of bargaining with Twiggy, and
the documentation to prove it, were miraculously not lost.
– Barry Avery
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