Nathan Tinkler’s troubles are mounting

On 21 May, Blackwood Corporation (BWD.AX) announced that liquidators acting on behalf of the creditors of Mulsanne Resources had made an application in the Supreme Court of New South Wales to freeze the assets of Nathan Tinkler.

Nathan Tinkler’s story is an incredible one. I don’t really know of anyone who had made so much money as quickly as Tinkler did from scratch. But as they say: “Easy come, easy go.”

Tinkler was originally a coal mine electrician working in the Hunter Valley of New South Wales. He formed a company called Custom Mining which eventually purchased the Middlemount coal deposit in Queensland. Custom Mining paid $A30m for that deposit (although I believe Tinkler only used about $A1m of his own money and did a deal with a well known law firm to do all the legal work for an equity interest, most people would have been shown the door).

Now here is the unbelievable part, within one year of purchasing Middlemount, Macarthur Coal bought it for $A275m from Custom Mining delivering Tinkler an enormous profit.

Now, I’m a conservative character and if it was me, I would have realized how lucky I was and not put any of this new found wealth in jeopardy. But Tinkler didn’t make all that money by being conservative or risk averse and he was after even more. Deal-making on a grand scale has seen the demise of many an entrepreneur in this country.

Tinkler got more, a lot more. Tinkler made hundreds of millions more from seemingly miraculous  deals in the coal sector with the end result being that he was apparently worth $A1 billion by the time he was 35 years old (in 2011). But it wasn’t to last.

Tinkler indulged himself with his new found wealth, he bought race horses, interests in a rugby league team and a soccer team as well as plenty of flashy cars. The well trodden path of many a nouveau riche.

It all came unstuck when Tinkler made a deal with Blackwood Corporation (a coal mining minnow), to purchase approximately $A28m in equity at around 30 cents per share (via Mulsanne Resources). A very ill-timed agreement as Blackwood shares were set to start a steep descent shortly after the agreement was entered into, proving that not everything Tinkler touched turned to gold.

Now, $A28m for someone supposedly worth around $A1 billion shouldn’t have caused any concerns whatsoever. But after Mulsanne Resources missed a few payment deadlines, it started to become apparent that Mulsanne wasn’t going to pay up and the liquidators of Mulsanne allege that it was insolvent when it entered into the agreement.

Now, I’m not about to speculate on the reasons that this whole deal went sour, that will be discussed in court. But suffice to say, this episode has done enormous damage to Tinkler’s reputation – you simply shouldn’t enter into agreements that you can’t consummate.