Only a year ago, Consolidated Minerals CEO, Michael Kiernan, was a hero to investors. The former truck driver had steered ConsMin from a minnow to member of the ASX200 with a market capitalisation of almost $1 billion. Kiernan was so popular with shareholders that after the ConsMin board refused to extend his contract last year, he was persuaded to stay by giddy shareholders who hoped that the good times would continue to roll.

However, in recent months the good times have very much stopped rolling. Those same awestruck shareholders who treated Kiernan as the messiah have seen ConsMin’s share price plummet from $4.40 last August to only $2.06. Things don’t look like getting any better soon, with ConsMin dropping a 3.51pm Friday afternoon bombshell on the market, stating to the ASX that it expects to “achieve a trading profit after tax for the 2005/06 financial year in the order of $20 million, compared with the forecast provided in March for a full-year trading profit in the order of $25 million.”

While ConsMin shareholders would no doubt be disappointed by ConsMin’s recent profit downgrade, equity investment, particularly in mining companies, is a risky business and failure to meet expectations is to be expected from time to time. However, ConsMin investors have the right to be aggrieved about the fact that between providing profit guidance in March and subsequently downgrading that guidance last Friday, Kiernan was feverishly unloading almost half his shareholding in the company.

On 6 March 2006, Kiernan stated that while ConsMin’s “growth over the last three or four years has been startling…the growth in the next couple of years should be equally compelling”. Obviously, the situation changed pretty quickly, because less than two months later, on 10 May 2006, Kiernan announced that he had sold exactly one million ConsMin shares for a tad over $2.66 million. Those shares would be worth around $2 million on recent prices. That means either Kiernan is a really lucky guy, or he knew something that everyone else didn’t.

One suspects, however, that Michael Kiernan will not so much as receive a slap on the wrist from ASIC. It goes to show, while procedures and technology have changed since the Poseidon boom of the late 1960s, the behaviour of some CEOs hasn’t progressed as far.

Disclosure: Adam Schwab is a ConsMin shareholder

Peter Fray

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