Former Consolidated Minerals boss Michael Kiernan is one of the Australian mining industry’s most colourful figures. That is quite an achievement given the mining sector is not one unfamiliar with larger-than-life characters. In fact, the former security guard appears to be developing a sort of “black widow” reputation in the industry. On Friday, October 9, a small mining company called Australian Zircon was placed in voluntary administration. Kiernan was appointed a director of the company in February this year, but insiders have told Crikey that his influence is considerable.
The voluntary administrator appointed to Australian Zircon is Pitcher Partners who have acted in the past as administrator of other companies with which Kiernan has been involved.
Australian Zircon owns a mine located 150 kilometres from Adelaide. It had in place contracts to sell its product to an Austrian company called DCM. DCM was also a substantial shareholder in Australian Zircon.
That Australian Zircon collapsed in itself is not especially peculiar. The minnow reported a loss of $34 million for the six months ending December 31, 2008, reported operating cash outflows of $17 million and had only $1.2 million in the bank. Last year the company managed to lose $14 million on foreign exchange derivatives by selling US dollars. This was particularly impressive given that its revenue was only about half that amount. Australian Zircon also reported $15 million in “other expenses”, which shareholders may have been forgiven for thinking deserved further explanation.
However, the happenings at Australian Zircon are not without precedent in Kiernan’s business history.
In fact, Kiernan has found himself a director of several companies that experienced difficulties. In June 2008, he was appointed managing director of Monarch Gold. A month later, the company was placed in voluntary administration. The administrator appointed was Pitcher Partners. A year later Monarch was purchased by a company called Stirling Resources Limited. The managing director of Stirling just happened to be Michael Kiernan (Stirling was previously called Crawley Investments and was Kiernan’s family company).
Kiernan was also a director of Matilda Minerals until June 24, 2008. Matilda owned an iron ore mine in the Tiwi Islands as well as a prospect in Cape York and some exploration licences. The company was placed in administration in October 2008. Lo and behold, in May this year, it was announced that Kiernan’s company, Stirling Resources, had purchased Matilda for $4.5 million.
Kiernan has also been involved with other struggling miners Redbank Mines and Olympia Resources. However, Kiernan’s controversial past is most associated with the company he is credited with building, Consolidated Minerals.
Kiernan quit Consolidated Minerals in 2005 after institutional shareholders had the audacity to reject a proposal to hand Kiernan potentially tens of millions of dollars worth of “in-the-money” incentive shares.
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A year later, Kiernan displayed a knack for selling shares at the right time. In May 2006, he collected more than $2.6 million from the sale of one million ConsMin shares for an average sale price of $2.66 per share. Shortly after Kiernan had sold his sizable parcel, the company announced a profit downgrade and the shares dropped significantly.
Michael Kiernan was not the only family member who displayed good judgement. Kiernan’s son, Laurence James Kiernan, sold 540,000 shares of Great Western Explorations at 49 cents per share and a further 1.02 million shares at 41 cents per share in 2006 (shortly after Michael had been appointed to the board). A a month later, Great Western’s share price had slumped by 23%.
Kiernan once told the Sydney Mining Club, that “to some I was a star. To others I was just an arsehole”. As the number of companies that collapse under Kiernan’s watch grows, it would appear that the group of “others” may be expanding at quite a rate.