The nickel mine that ensnared two tycoons

PUP leader Clive Palmer comments to the media at a doorstop following today's election on the new Speaker Tony Smith.

Several decades ago, a footballer came from the field at the end of the game and said to his coach, “How did I go?’’

The coach famously replied: “Obviously you went crap. If you had done good, you wouldn’t have to ask.’’

The same could apply to certain nouveau riche self-proclaimed “billionaire entrepreneurs’’ who, on close inspection, often possess little more than massive risky bank loans and the private jet ­status symbol.

It is intriguing in that context to look at the parallel lives of “billionaires’’ Clive Palmer and the late, disgraced Alan Bond, and how the fragility of their bluster was exposed by a relatively insignificant nickel mine and processing plant at Greenvale, 25km north of Townsville in north Queensland.

In 1986, Bond wanted to buy shares owned by the Queensland government in the lucrative Castlemaine Perkins XXXX Brewery so he went to negotiate with the then premier, Joh Bjelke-Petersen.

Bjelke-Petersen refused to speak about the shares unless and until Bond settled a defamation action the premier had launched against the Nine Network (then owned by Bond) because its current affairs show had aired allegations that Bjelke-Petersen had improperly obtained overseas loans.

Bond, without reference to his lawyers, immediately wrote a cheque for $400,000. The share deal was then addressed and he ­acquired the brewery.

About the same time, Bond bought the Greenvale Nickel mine. The mine had a financially troubled life from its beginnings in 1973. The Coalition government of the day (headed by Bjelke-Petersen) offered a guarantee for some of the project’s commercial debt, to assist it to stay viable. The joint-venture owners were subsidiaries of Freeport Minerals, a large American multinational mining company, and Metals Exploration NL.

In the 1970s nickel prices were in a long-term slump while OPEC had lifted oil prices, which drove up the operating costs of the nickel plant. The project could not service its debt and the government was forced to honour the guarantees it had provided — putting in a massive $100 million that it had ­little prospect of recovering.

By the mid-80s the project was near to closure, with nickel reserves at the Greenvale mine rapidly running out, and local alternatives non-existent. Then along came Bond, adopting a plan that had been hatched by management and set out in the 1978 deed of arrangement, but that had lain dormant until then. That plan was to resurrect the project using ore imported from New Caledonia. Bond spoke of turning it into a grander international nickel plan involving several mines and ­refineries.

His company, Dallhold Investments Pty Ltd, acquired the equity in the owner companies and negotiated the buyout of the non-guaranteed debt at a steep discount of 10c in the dollar. The government bought out the remaining guaranteed debt for equity in the project — paying lenders $38.6m and ending up with a 12.5 per cent joint-venture interest.

When the Goss government came to power on December 2, 1989, the position with Greenvale Nickel was precarious. A lot of money had been paid to various banks, and to show for it, the state had only the 12.5 per cent joint-venture interest, with a partner (Bond’s Dallhold) that had questionable ability to pay for the capital investment necessary to revive the project.

There were no funds for the importation project and money was being wasted pursuing mirages such as the Halifax Bay port development, which neither the project nor the environment could ­sustain.

That was when Standard Chartered Bank, frustrated by Bond “upstreaming’’ (using returns from companies such as Dallhold to service family company loans but not the loans on the projects earning the cash), lowered the boom, and had receivers appointed to various Dallhold companies.

The ownership agreement stated that the Queensland government absorb debts and exercise an option to acquire a further 16 per cent of the mine.

Under the contingency agreement, the Queensland government could claim the extra 16 per cent if the Bond expansion project did not proceed — and obviously it couldn’t when the company was placed in receivership.

Bond was in a pickle. His timing was extraordinarily bad.

After 32 years in opposition wilderness, Labor had won government under the guidance of clever lawyer Wayne Goss. The election was on December 2, 1989, and Bond had only a fortnight or so to somehow convince the new government not to exercise its contract rights and to allow him time to “trade out’’ of his woes.

But he was dealing with Goss and the tough and smart new treasurer, Keith de Lacy.

In a 1995 interview with this author, de Lacy recalled the events of the time — events that started the fall of Bond’s house of cards and eventually led to his exposure as a bankrupt and a charlatan who defrauded hundreds of millions from Australian investors and the nation’s banks.

A panicked Bond demanded a meeting with premier Goss before the new government had its first cabinet meeting, and he and four minders met on January 11 in Brisbane with Goss, de Lacy, Treasury official Graham Grundy and legal adviser Martin Kriewaldt from lawyers Feez Ruthning.

There was added drama because a national strike of airline pilots made travel difficult, with a fleet of planes from other countries operating spasmodically and charter companies trying to pick up the slack.

De Lacy lived in Cairns and Bond rang him offering to send his private jet across, pick up the treasurer and fly with him to Brisbane for the meeting with Goss and the treasury officials. But de Lacy said there was no way he would spend any time in Bond’s company without his Treasury advisers, so he made his own way to Brisbane the following morning on a Swissair flight.

Bond thought he could bluff the new and obviously inexperienced government, and he held a trump card with the threat that the mine could close and cause the loss of hundreds of jobs. That was not what a new Labor government wanted on its record.

De Lacy said Bond demonstrated an impressive knowledge of his own legal position, but in truth his arguments were falling on deaf ears.

“Bond became quite aggressive and then accused Wayne and me of carrying on like thieves in the night,’’ de Lacy recalled. “He then appealed to our sense of fair play and said we were being immoral and were not abiding by the spirit of the agreement. I glanced across at Wayne and could see at that moment that we had him.’’

De Lacy strongly denies that Labor’s resentment of the “$400,000 bribe’’ Bond paid to Bjelke-Petersen had any influence on their rejection of Bond’s pleadings, but the smile on his face as he made the claim gives cause to wonder.

During de Lacy’s period as treasurer, the Queensland government sold its shares in Greenvale and the associated Yabulu nickel refinery and made a huge ­profit.

Then in 2009, after the business had gone through a succession of owners, it was bought by Clive Palmer.

Palmer burst on to the business and political scene, proclaiming he was a “billionaire’’, winning a seat in the federal parliament, then demonstrating how he could throw money around with ­extravagant fervour.

He decorated a top-class resort with hideous dinosaur statues, bought private jets, lost the major golf tournament that was held at the resort every year, bought staff of one of his businesses Mercedes-Benz cars as presents, bragged of building a copy Titanic, and got involved in myriad court battles over money and contracts.

Nobody is suggesting he is in any measure a fraud or criminal like Bond was, but many are questioning his business acumen and his investment priorities.

Not the least of those asking questions is the relatively new Palaszczuk Labor government in Queensland to whom he has gone cap in hand seeking financial support to prop up the Yabulu refinery project. He claims that without an injection of tens of millions of dollars in government support in the form of a loan guarantee he could be forced to close the business and cause 700 locals to lose their jobs in the lead-up to Christmas.

So it was the Bond situation all over again. The current Queensland Treasurer, Curtis Pitt, is every bit as tough as de Lacy. He holds the northern seat of Mulgrave, and his father, Warren Pitt, who previously held the seat, served in cabinet with de Lacy. Pitt senior and junior are well aware of the chequered career of Greenvale Nickel and the Yabulu refinery and probably know more about its production potential than does Palmer.

Premier Annastacia Palaszczuk has responded by ordering a forensic examination of the accounts and is awaiting top treasury advice. Like de Lacy and Goss before her, Palaszczuk is not going to be rushed or bullied into irresponsibly throwing good money after bad. And throw into the mix the fact the government does not have funds to risk, Palmer’s task is made all the more difficult.

As much as the careers of “paper billionaires’’ Bond and Palmer have similarities, the two are quite different men. Palmer has a much better grip of Australian politics, is a much more pleasant person in dealing with people and is nowhere near as reprehensible as was Bond in business.

Never forget how Bond bought the Toohey’s hotel chain, refused to honour the rights of lessees, and sent many publicans broke. Several committed suicide following Bond’s heartless treatment of them. But both men insisted at every opportunity in flaunting their apparent wealth and demanding that because of it, they warranted special consideration, especially when it came to concessions available from governments.

For his part, Bond ended up in jail, and in total disgrace.

Palmer is going through troubled times. He is a ruthless business operative who has learned that his political connections are not enough to get him everything he demands. There is little doubt that political decision-makers are wary that his claims to great wealth might be more than a little flaky.

And the lessons learned in the Bond era (including with another shonky, Christopher Skase) have not been forgotten.

Palmer is facing an uphill task in garnering the support he seeks from the Queensland government. But perhaps, if all else fails, he could approach the Labor government and “appeal to their sense of fair play’’.

Good luck with that one.

Tony Koch is a former chief reporter with The Australian and a five-time Walkley award-winner.