Barry Tudor, the Sydney-based mining boss who lead Gloucester Coal through a string of bruising deals during the last coal boom, is once again hoovering-up coking coal assets in Queensland.
Tudor's private company, Pembroke Resources, bought three bordering deposits in the Bowen Basin off Peabody Energy's bankruptcy process earlier this year for A$120m ($92m). Tudor has grouped the tenements into one huge complex, Olive Downs. It is “only our first” acquisition, Tudor says, in an interview with Global Mining Observer. “There's an appetite from us to buy again and there's an appetite from our backer. They like the metrics of met coal.”
Pembroke has cash backing of $200m from Houston-based private equity group Denham Capital, which has $8bn invested in oil, gas, electricity and mining. A former accountant, Tudor joined Gloucester in 2004, when the share price was 69 Australian cents. He left in 2011, with the shares trading at A$12.80, having overseen a manic string of deals.
“It was a pretty heady time in coal,” he says, “and I was in the thick of that. We were involved in a hostile takeover, merger discussions, acquisitions, takeover defence, you name it. It was exciting. The amount that I learned during that time was immense. You've got to run your mine, to make money, but you've also got to look at opportunities, or defend against opportunistic approaches, so it's quite complex.”
Serious and intense, Tudor alternates between being hesitant and emphatic. He left Gloucester for Hong Kong-based trading group, Noble, which then went after Gloucester in a $2bn deal. It was “highly complex” and “quite bitter”, Tudor recalls, going twice to Australia's takeover panel. “It was a public stoush. There was lots of
back-and-forth. In the end we were successful.”
The M&A frenzy pushed Tudor through dozens of data rooms, looking at rival assets, including Olive Downs. But the tenements were ultimately swallowed by Peabody Energy in a $5bn deal in 2011, crowning the top of the market.
Peabody filed for Chapter 11 this year, putting the tenements back on the market. Pending approvals, the northern part of Olive Downs is ready for initial production of 1m tonnes per annum within twelve months, Tudor says. “It's a clean slate. The ability to plan a 30-year mine plan on a fresh piece of ground is quite rare. Normally you have to take-over what somebody's already started, and attempt to turn things around. We have a clean sheet to put our own stamp on. I think that's of huge value.”
Olive Downs has a vast JORC resource of over 950m tonnes. At peak production, it would be the third biggest coal mine in Australia, according to Tudor's mine plan. “We'd differentiate ourselves from most deals that have been done recently,” he says. “This is major. We plan to build things up, cleverly, but this is capable of production well in excess of 15 million tonnes per annum for thirty years. It's a potentially major mine.”
Tudor has been patient in returning to coal. He spent two years talking to Denham and two more, waiting for the right deal. “He could have rushed out and bought a dozen assets,” one colleague says. “He was waiting for something really substantial.”
“We could have done lots of deals,” Tudor says. “And this is only our first acquisition. We're still looking for others. We have a very good IP now on what we think are the best assets, not just assets for sale, all assets.” Olive Downs, he
says, was “near the top of the list” and “we've got other assets that are also in the same position.”
Pembroke has looked at “most” of the mines being offloaded by Anglo American, in its bid to pay down debt. But having locked-up Olive Downs, Tudor is unlikely to be bounced into hasty deals. “It has to stack up technically, it has to make money now,” he says. “It's not a flip of the coin. It's a thorough technical analysis from the ground up, which takes a lot of time and money. And in the end it pays dividends.”
“We have a very committed partner in Denham Capital. We can look at assets, do our due diligence and then negotiate with full confidence. It's incredible. When you have that sort of support, you're fully funded, you have time to think, you have time to do a proper technical due diligence. It's just good business. We also have a number of other options: equity, debt, off-take, whatever you like.”
Will coking coal return to the boom days of 2011, when prices hit $330 per tonne? “Only time will tell,” Tudor says. “We certainly don't make any investments based on a view that that will happen again. It may be that things just quietly build up. We definitely feel that there'll be strength in the market, but whether it reaches the heady days of the past, I don't know. You've got to buy assets that can make money at the bottom of the cycle. Then you don't have to worry.”
Tudor has kept a lid on interviews and enjoys being out of the spotlight. “I can’t tell you too much,” a Denham director told The Australian, when Pembroke was launched. “Our main focus is getting production out of Olive Downs as soon as possible,” Tudor says. “We're very proud of this asset.”