I gave this keynote speech as part of Business News‘ Success and Leadership Series in 2004. At the time I was Chairman of Croesus Mining, DeGrey Mining, Mannwest Group and Mannkal Economic Education Foundation. Any modest success that I’ve been fortunate to enjoy has come about through my contacts with a remarkable bunch of people who have travelled with me on so many journeys. Even more important have been the ideas that have influenced me, and I hope I can give you some idea of how highly I value the input and support from those people and their ideas.
My first job
My first business venture was as an 8-year-old paper boy, selling the Daily News, after school each day. Like so many Kalgoorlie kids, I was desperate to gain my financial independence and have a bit of fun too. I have three clear memories of this career:
- Walking home late one bleak winter’s night, some little old lady, feeling sorry for me, invited me in and fed me. She probably picked me as a homeless orphan. Easy to do, as nobody in Kalgoorlie had any money in those days and we all looked like orphans. Unremarkable, but I can still remember having difficulty eating my second meal when I eventually got home.
- Some guy approached me and asked me where the brothels were. I had no idea of what a brothel was (remember I was only 8) so he started gesticulating with his hands and fingers. “Oh”, I said, “you mean the ‘knockers’—first turn to your left and four blocks down, you can’t miss them.”
- Again, on a different occasion, approached by a seedy looking guy in front of the Mount Lyall Hotel. He asked me if I would come down the back lane with him for a while. “Well”, I said, “you’ll have to buy all my newspapers.” I had a great arm-full of Daily News. To my surprise he said, “yes”. Then he gave me all this money and he took all my newspapers. Well, I looked at him and he looked at me and that’s when I started running. About one block later, I could still hear him huffing and puffing behind me so I took a look over my shoulder and you know what? He still had all those newspapers in his arms so I knew that I would eventually outrun him! I’ve often wondered what he ever did with all those newspapers.
The makings of an entrepreneur
My next venture was selling crystal sets. For those of you who don’t know what a crystal set is, back in those days kids used to make a very rudimentary radio consisting of a germanium crystal with a fine steel wire that we called a “cat’s whisker” connected by copper wires to a variable condenser which enabled you to tune into the various radio stations. There was no battery in these things, but you could listen to the radio through a set of headphones. They didn’t cost much to make but you could mount all the bits and pieces on a nice polished aluminium base and sell them for £5.
So without my parents’ knowledge, I stuck a sign up beside the front gate saying “chrystal sets for sale.” (Spelt C-H-R-Y-S-T-A-L). Ten minutes later and my first customer knocked on the door. Some lady asked my mother if she could speak to the person selling crystal sets. I went up to receive my first order and she said to me, “young man, you don’t know how to spell crystal, that should be C-R-Y-S-T-A-L.”
I soon graduated to “one valve” radio sets. These were complete with a battery and a small speaker. Again, that market didn’t take long to fill. I had a go at playing the trumpet and used to practise vigorously. One day, a guy knocked on the door with a £5 note in his hand. He explained that he was trying to sell his house next door and that if I promised not to play for a month, he’d give me the £5. That was much better than making crystal sets!
Perhaps it was all this musical inspiration that led me, several years later, to bring to Kalgoorlie the city’s very first juke box. This great Wurlitzer played 80 of those 45 rpm discs with the big hole in the centre. That was the year of the Everly Brothers, and the kids only wanted to hear the Everly Brothers and, in particular, their song “Dream, Dream, Dream”.
That’s when I stumbled across what I can now identify as the Bill Gates Business Model. I couldn’t understand what was going on for a while because I was clearing more money out of that juke box than there were hours in the day to play that number of records. Then it clicked. When you walk into the Peter Pan Milk Bar and put your shilling in to play that particular Everly Brothers’ track, you go over and have yourself a drink in the corner, then somebody else comes along and sticks their shilling in (they might choose the same record as you). Then somebody else comes in …. Same again, and they go for the Everly Brothers agan. Eventually, when the track comes up everybody in the room is happy because they’ve had their shilling’s worth. But irrespective of how many people have put their shilling in, it only plays once.
I call that the Bill Gates model because, when he sells software over the Internet, he starts with one in stock, sells a lot through the day and the day ends up with one in stock. Maybe thousands of stock turns per day. It beats the hell out of the old conventional model where you only turn your stock over four or five times a year.
Take me to your leader
In my personal view, my leaders are people who have influenced me to the point of making a change in my life or my behaviour patterns. It’s an interesting thought experiment, sorting through all the people for inclusion in that category. I find that there were literally hundreds of people from whom I have learnt something, but very few who have actually modified or shaped my behaviour or thinking. So few in fact, that I could count them on my fingers. It goes beyond the natural influence of parents (for which I’m eternally grateful), or environment or events.
Perhaps the one person who influenced me the most was Leonard E Read. As background, in the mid-1940s Read had built up the Los Angeles Chamber of Commerce to be the largest municipal business organisation in the world and he was influenced toward a libertarian, free-market way of thinking by an influential Chamber member, Bill Mullendore, the head of the Southern California Edison Corporation. (Mullendore, incidentally, had previously been President Herbert Hoover’s Executive Secretary.) Read then took the bold step of moving to New York State where he set up the Foundation for Economic Education in 1946 and that became the world’s first free-market think-tank, upon which many hundreds have since been modelled.
Through my involvement with Read, many years later, I became a representative for the Foundation for Economic Education in Australia which, in turn, led to the establishment of my own Mannkal Economic Education Foundation, structured to have a life of its own; indeed, arranged in such a way that it will outlive me.
Back to Leonard Read. One day, in 1982, he sprang it on me to give a lunchtime talk to a group of his associates in New York, to explain how I first became involved with his Foundation, thirty years earlier, in 1952. To me it seemed simple enough, but they were fascinated to hear how a 16-year-old, working after school in his father’s mining engineering supply business, used to open big pine cases of Timken roller-bearings that we imported from Canton, Ohio, USA.
The packing in the boxes included coloured comic-strips (our Australian comic-strips in the ’50s were all black-and-white) together with crumpled literature from the Foundation for Economic Education. Timken had been a supporter of that Foundation and I can still remember the circulation list affixed to the front of the papers bearing all their senior staff’s initials and then directing its way down to the packing department. This crumpled wisdom covered topics such as business ethics, the moral foundations for capitalism, the concepts of limited government and increased individual responsibility.
(As an aside I should say that I enjoyed the message so much that I used some of it several years later when I was the Editor of the Kalgoorlie School of Mines magazine—and did that bring the house down! Kalgoorlie was pretty much a union-based town in those days and wasn’t quite ready for this kind of wisdom.)
But back to my teenage education: I still felt that I was on the right track but I needed a little more information so that I could defend myself and these views. So I wrote to the Foundation explaining that I was having a bit of trouble and they responded with helpful material and a regular copy of their monthly magazine The Freeman. Several times over the following years I wrote material and submitted it for publication in their Freeman magazine. They never published anything, but one day I received a letter from their President, Leonard E Read explaining why.
He politely explained that I might have been a little too pushy and, in his own quiet words: “You only have a licence to change yourself, not others. All you can do is to bring an idea to the threshold of someone’s consciousness, and then it is up to them to accept it or reject that idea after due consideration. If they then accept that idea, it will be with them for life”. On another occasion he explained, again in his own words: “As one acquires an awareness of how little he knows, humility replaces arrogance; this tends to improve a person’s nature and sense of humour”. Not earth-shattering stuff, but I got the message. I have never forgotten his quiet reasoning and it has certainly modified my own approach. It’s also helped my strike rate for having articles published all over the place.
I would like to tell you more about this remarkable man Leonard Read and how he worked in conjunction with the notable economists, Mises and Hayek, and how his philosopher friend, Professor John Hospers, from the University of Southern California, cropped up in my life later in 1961 when I did an external unit in philosophy at UWA. I worked from Hospers’ text book, little knowing that I’d later meet and become friendly with Hospers as I have with many of the other “larger than life” characters that Read gathered together, or how Read steered me into distinguished economic company in the Mont Pelerin Society which meets annually in different parts of the world.
So what did Leonard do to make him a leader for me? He simply took the time to write me a letter.
Success vs failure
As it has been said, the great dividing line between success and failure can be expressed in five words: “I did not have time”. But in Read’s case he did take the time, and this is probably why I reply to far more letters than I really need to. Read’s colleagues enjoyed my story of “opening up old boxes” and they were encouraged that their material, after doing the rounds of all the executives at the timber factory, and being reduced to “packing”, could later be recycled on the other side of the world. It proved to them that their ideas had consequences.More consequences for me I suspect, than for them.
In this investigation of what type of leaders I admire, I find that I can only admire leaders who have managed to fully integrate their ethics throughout their business, personal and family lives and dealings. Living by a double set of standards only brings people undone, as we have witnessed with the crop of failed leaders of the 1980s and some, more recently, who spent time in jail. I can’t believe that these same people would have treated their friends and families as badly as they treated their electors or their shareholders, and how they managed to shrug it all off simply by saying “politics is politics” or “business is business”. Their “legacy” (if that’s the right term) has created a greater challenge for us in restoring the place of ethics in our own society. I will come back to this later.
Kalgoorlie’s School of Mines
I mentioned earlier that I became the Editor of the Kalgoorlie School of Mines magazine and I think it was at the School of Mines that I became interested in the general subject of efficiency because I managed to produce a light-hearted thesis on the matter of vertical burial (sub-titled, Why is That Headstone Smiling at Me?). It seems that I was uneasy at the lack of efficiency exhibited at the local graveyard and I noted that in order to bury one human body (cubic displacement approximately 2 cubic yards, boxed), the authorities were shifting 11 cubic yards of earth. Also, further on the debit side, 9 cubic yards of this earth had to be replaced. The overall displacement efficiency being 15 per cent.
I proposed that with vertical burial, in close proximity to the surface, a displacement efficiency figure approaching 100 per cent might be obtained. My hopes for realization of this objective crashed upon discovery of a council by-law containing the clause “minimum depth—six foot below the surface”. To conform with this by-law, total depth for vertical burial would be 12 foot, thereby reducing the efficiency figure to 50 per cent, and greatly increasing the danger of striking oil, which would necessitate heavy concrete ballasting of the “interned” lest it repeatedly float to the surface.
These investigations were coming to a dead end, but were resuscitated after experimentation with some of the newer rigid plastics. These were considered to be an ideal way of preventing decomposition of the deceased. Furthermore, results from this new “PVC Plastic People Dip” were surpassing all expectations, and with recognition of the potential of this new encasing method, we approached local authorities, who agreed that this new coating afforded sufficient protection against the elements, hungry canines and vandals.
This breakthrough left the path clear for obtaining maximum efficiency in the graveyard. Having gone this far, we wondered at the possibility of going beyond the ultimate goal of 100 per cent efficiency. “Yes,” said one student to their dismay. “Drop them down only part of the way.”
Efficiencies reached by using this plan
Would ensure its acceptance by civilized man.
Their heads and shoulders transparently cased
Set with expressions, some pleasantly faced.
Headstones of stone, there would be no more.
Epitaphs now moulded below the jaw.
In fact, it seems in reality
Headstones for ever they would be.
For tourists our town would be a must
Now somewhere to sit, up out of the dust.
Seated on heads in circles arrayed
With assorted expressions gaily displayed.
Many an hour they could spend each day
Discussing the merits of those passed away.
This one it seemed died in great pain,
He’d taken Chem. 1 and been driven insane.
The man on our right had taken Maths II,
From the look of delight, he’d surely scraped through.
Plain to see he’s an engineer,
The look on his face is so sincere.
Higher efficiencies may be made,
By using a Ramset instead of a spade.
The bodies are sorted and the tall and slim
May be loaded in Ramset and driven straight in.
Now that you’ve heard all about our plan,
We hope you’ll all die, just as soon as you can.
I was actually keen to do geology at the Kalgoorlie School of Mines as my mother had studied geology there (I found later that she was in fact the first female geology student). Like most Kalgoorlie homes, ours was littered with rocks, people were always bringing in samples and explaining how they had discovered the next Golden Mile.They talked me out of geology because the view at that time was that there was really no future for mining. They were nearly correct.
You need to remember that in the late 50s there was no iron ore mining, there was no nickel, and gold mining was stuck with a government-fixed price of US$35 per ounce which was throttling the industry to death. So I became an electrical engineer. That was pretty useful as our family business was busy converting all the steam driven winders to electricity (same headframe, same mechanical drums but replacing the steam component with electric, complete with some quite sophisticated for the time, over-speed and over-wind protective controls). By the time we converted all these, they started closing them down, one by one, and many were being shipped off overseas, as Kalgoorlie was then suffering advanced “death-rattles.” That was about the time my father had a serious heart attack and this put him out of action for many years.
Formal business training
The State Manager of Noyes Brothers-Crompton Parkinson, electrical engineers, was in Kalgoorlie on the actual day that my father had this heart attack and, alongside dad’s hospital bed, Syd Webster said, “Charlie, you have no-one to run your business, your boy hasn’t got a clue, so if you hire a professional manager, we will take Ron off your hands for a year and give him back to you with at least a fighting chance.”That was to prove an interesting year in Perth, Melbourne and Sydney. Their idea of formal business training was for me to do all the senior departmental heads’ jobs whilst they took turns to go on holidays.
All was going smoothly until, one day, I was called into Mr Webster’s office where he announced that he was sending me on a diplomatic mission for the company and that it was important that I present myself positively and overcome my natural tendency to be shy. So that I would look the part and not disgrace the firm, he insisted that I should take a trip into the city and “get a hat”.
At age 18 I had never been a “hat person”, but feeling that a great deal was expected of me I made the purchase and received instructions from the “gentlemen’s outfitters” on just how to wear a hat and when to take it off, and the important part it plays in making a statement that you are, in fact, on a very important mission. (Of course this convention of dressing the part is really a load of rubbish. One of my favourite philosophers, Henry David Thoreau asked the interesting question: “How far men would retain their relative rank if they were divested of their clothes”. He even distrusted any enterprise that required new clothes. But as long as it remains a convention, we are stuck with it.)
But I digress. With hat in hand I presented myself back at Mr Webster’s office, where he briefed me on this new challenge. He said that the firm had been fortunate in being appointed State Distributors for a new product made by Lee-Acme, and that there was a great need for this item in every one of Perth’s important buildings. This was to bring me in contact with every big company on St. George’s Terrace. He explained that, in years to come, I would remember how I played a major part in solving their problems.
I could see that he had a technical file that he was about to present to me, and he certainly had a wonderful way of preparing my appetite for the challenge. He then outlined the plan of attack. I was to go to the Head Office of each of the companies that he had listed and ask to see the head girl. For the first time I “smelt a rat”. “What is the product we are selling”, I asked. He replied, “They are Lee-Acme Sanitary Incinerators”. (Later I found out that in the “trade” they were given a far more colourful name, which in this present company must remain unmentioned).
Now, please bear in mind that this was in the days before disposal plastic bags and that, without proper disposal facilities, ladies were prone to dispose of their unmentionables by flushing them down the toilet, which in turn created huge plumbing problems, huge plumbing bills and general pandemonium.
On receiving this news, I just about shrank through the floor, but I did have the presence of mind to ask him: “Why the hat?”. He explained that if I got too embarrassed, I could just pull the hat down over my face. Well, the best bit of advice that I could give anyone who is shy, with a tendency to stutter and totally lacking in self-confidence would be to get a job selling Lee-Acme Sanitary Incinerators. I ended up in more ladies toilets in Perth than I care to remember.
I measured up for, and supervised the installation of, more of these units than they ever thought possible. There was a huge requirement for them and most of them managed to pay for themselves, through reduced plumbing costs, within the first week. I learned later that the firm had been sitting on this agency for three years and that no-one would get involved with it. In that sense I was being set up, albeit in a rather good-natured way.
Strangely enough, Syd Webster and I remained very good friends, and some 35 years later he visited Kalgoorlie for several of our Croesus Mining Annual General Meetings, as a shareholder of Croesus Mining. So in a way he was still my employer. Again, another lasting friendship.
The next 50 years
Now, let’s cover the fifty years between my year of formal business training and today. We skip through some dismal years of business survival in Kalgoorlie from about 1960, including some monumental political bungling called the “credit squeeze” that closed down thousands of Australian companies. That’s when I started my hobby of collecting examples of Perverse Consequences or “how government always achieves the opposite of their stated intent.” During these years, our family company survived and responded enthusiastically to the new opportunities that flowed to the region when Western Mining Corporation’s nickel discovery at Kambalda marked the end of what you could call “a long bleak winter.”
The nickel boom started slowly at first, but WMC were able to get the Kambalda mine operating from drilling to mining in 9 months. More specifically, Sir Arvi Parbo told me recently that the first drill hole was sunk on January 28, 1966 and about 19 months later they had the grand opening on 15th September, 1967 where they had completed the milling concentrating facilities. Not only had they built the township by then, but they had already been producing nickel concentrates for 3 months. This is a tribute not only to the company, but to the lack of beauracratic impediments at that time.
Today, with the acceptance of the bizarre notion that everyone else has more control over a mining property than the actual holder, it would take up to five years to get the operation up and running, if it ever got up at all. In 1969, the nickel boom was in full swing. The intense exploration around the Kalgoorlie region involved over 350 Australian and international companies. There were more geologists in Kalgoorlie than in any other city in the world (strangely enough, the second highest concentration of geologists was in New York).Our own family company staff increased from 4 to 48, and of course we moved into much larger, brand new premises—as everyone did—thinking that this would go on forever.
I was tearing around the world, signing up new agencies for the latest and greatest mining equipment, (we were sending mechanics to be trained in Sweden) and that’s about when everything stopped dead. WMC had got up and running, mainly because they had moved quickly and, more importantly, because they raised the money through share issues. Poseidon failed, mainly because although they got up and running, they did it on borrowed money.
Of the 350 companies that were actually seeking nickel around Kalgoorlie, quite a few actually found nickel, but how many actually made a profit from mining nickel? Two!! WMC and Metals Exploration.
Retrenchments were common-place around Kalgoorlie as companies departed almost on a weekly basis. Our family company was over-staffed and was similarly affected. Eventually we moved out of our brand new building and then operated from our home for quite a few years—but we survived through all this.
The tax man cometh
During all this activity I was also an active prospector and a problem emerged when a bundle of bona fide prospectors all received an income tax assessment that seemed like a bad dream. The lovely lads at the tax department assessed me on some vendor shares in a company called Westralian Nickel, assessed at the price of $8.50 per share, which they were on June 30, the previous year. The only problem was that I couldn’t sell them as they were escrowed Vendor Shares (which I actually subsequently sold for 15 cents each).
A fairly fat file of correspondence developed between me and the Tax Department which was actually charging me 10 per cent on this fictitious “big number” that they debited against my account. I even wrote them poems, ridiculing their calculations. All I got back was a letter saying that they had decided to increase the interest rate from 10 per cent to 20 per cent. Of course, I told them this was irrelevant because 20 per cent of nothing is still zero. But when you can’t reason with people, it’s best to just walk away. So that’s what I did.
Our business was actually running well, with good people that I could communicate with from a distance. So, for the next ten years or so, I was pretty much on the run, involved in a series of what I’d call “heroic misadventures” such as:
- Looking for nickel in Indonesia.
- Joining with 10 other individuals to form our own political party in Australia. We may not have been politically successful but we influenced a lot of important outcomes.
- Running a hotel in Bali.
- Working through the Chamber of Commerce (which is when I first worked with Harry Kleyn). As I recall, we were instrumental in having our State’s transport laws repealed.
- Organizing an ocean liner to tour the South Pacific with a bunch of Australian rock groups.
- Working for a rapidly expanding merchant bank by the name of Nugan Hand. Now that was an exciting adventure. It was like a huge “laundry”. You must understand that Australia was in such a political mess in the 1970s and Whitlam’s policies were driving businessmen out of Australia. It was common to see a sign on office walls saying “will the last businessman leaving Australia, please turn off the lights”.
As these business people were leaving, they needed to take some of their own money with them, so these draconian government policies gave birth to a flourishing “money laundering” business, that worked really well…for a time.
Rehabilitating Ron: Time to come home
Well, after a few years of this high adventure it was time to come home so I wrote a polite letter to the Taxation Department explaining that their “big squeeze” had extracted no blood, suggesting that if they tear up my tax file, I would re-join the persecuted and oppressed band of Aussie taxpayers. They quickly agreed, so I’ve been a very reluctant tax-slave ever since.
There were two reasons that I decided to rejoin conventional society:
- My four children said that they were embarrassed at school when all the other children were able to answer the question of what their father did.
2. There were signs of a stirring of the gold industry after all these years of paralysis and I felt that I should be part of this stirring.
Our family company had soldiered on bravely during all my “Misadventures”. Because we had Volvo (trained in Sweden) mechanics for the big Kiruna underground diesel trucks, we’d been approached by Volvo Truck and Volvo Car to see if we would handle their products. So for seven years we were also Volvo distributors until the Liberal State Government put us out of that business. Why? Because we wouldn’t join the “protection racket” that they were operating, called the Motor Vehicle Dealers Licensing Board.
The Minister for so-called Consumer Protection (Ray O’Connor) took us to court for being the State’s leading independent unlicensed car dealer. We asked the well known Labor Lawyer, Julian Grill, to defend us, and he had me explain to the magistrate how proud I was of not requiring government protection against competition and how we were successful because of continuing support from our clients.
The magistrate asked if there were any victims, i.e. disadvantaged clients? When it was clear that the answer was ‘no’, he threw the case out. Interestingly enough, it wasn’t many years later that it was our persecutor and subsequent State Premier, Ray O’Connor, who himself went to jail. You never know, do you?
Having cleared the deck of this minor irritation, we expanded our family companies into the gold prospecting business and this led to a series of joint-ventures with major companies where they earned interests in our mining properties, by following up our first-pass prospecting work and continuing with exploration. This also led to a series of public company board appointments for me.
Let me pause here to explain another significant reason why so many nickel companies failed in the earlier nickel boom and why so many of the subsequent gold companies succeeded. Due to some peculiarity of the Tax Act with nickel, if you vendored mining properties into a public company in which you had any ongoing responsibility i.e. directorships, this would extinguish completely your tax exemption. If you became a significant shareholder in that company as a result of your mining properties, you would have to put a few “nominees” on the board and in many cases they had no interest, commitment or passion in that company.
With gold, however, this tax nonsense did not apply. So you could follow your ground, with your passion and commitment, with plenty of follow-on to ensure the company’s success, because only then would you yourself be successful. It’s still a good tip: invest only in companies run by people whose own money or shareholding is at risk.
A reading list
Well, I was thoroughly enjoying this renewed interest in gold and building up a few mining assets when, one day, in 1982, Keith Parry (a former School of Mines student with me, who later became a Director of Western Mining Corp and Chairman of Central Norseman Gold Corp.) called into my office in Brookman Street, Kalgoorlie with a book in his hand and said: “I owe you a book, so please have this one. Do you mind me telling you why I am giving you this book?”
Naturally I was curious, so I let Keith continue to explain how he had been worrying about the way I had been developing exploration properties over the years and joint-venturing them out to the larger companies. In the long-run, he explained, that approach is not good value as larger companies are very inefficient with any early stage exploration. He said to me, “You will get more ‘bang for your buck’, if you do the exploration yourself. This book”, he continued, “hopefully will stimulate you to gather a key team of people around you and float a company to take care of the exploration yourselves.”
“Your mining equipment supply company that you have been running for so long has got something that some of the larger companies lack—you guys will go beyond the call of normal duty to keep our WMC operations going. I have watched the way you ‘borrow’ components off some of your new drill jumbos and other mining equipment, to keep our equipment running because you are aware that downtime costs us around $250,000 per hour. The larger companies we deal with often spend all their time seeking permission from head office before they make any move at all. If you can apply that sort of fast decision-making to your exploration then you will succeed. WMC used to be like that, but we are ‘losing the plot’ the larger we get.”
The book Keith gave me, The Hunters, by John Masters is described on the cover as “the intimate personal record of the building of a uniquely successful Canadian oil exploration company…by the President of Canadian Hunter Exploration.”
The book was a real “ball grabber” of how Masters, his colleague Jim Gray and two geologists left the safety and expertise of a large company to enter the realm of exploration. They became a company, without assets but with lots of ideas. Their ideas were good and they had a great bunch of friends to help them over the corporate hurdles. Keith Parry knew I would be sucked into the challenge and about a month later, when he next saw, me he said: “Have you got that company together yet?”
I had Croesus registered as a company early the following year. There were many good reasons why we didn’t actually list for another three years, but at least the wheels were set in motion. I later thanked Keith for the book and explained how it had brought a few threads together for me and I clearly remember his answer, “Ron, I would have to give you a whole library of books to repay you for giving me that copy of Ayn Rand’s Atlas Shrugged.” He continued: “Until I read that book, I could never really understand why mining and other productive industries get such a hard time from the very people who benefit most from them. I used to think it was ignorance, but now I understand exactly what is going through their minds.”
Now for those who have not read Atlas Shrugged, I would urge you to put it as number one on your reading list. It is like no other book you have ever read. It is a dramatic explanation of the changing pattern of today’s society and events. Events, for example, where we currently see the ATO and unions taking priority over secured creditors, and dubious Native Title Claimants taking priority over legally granted exploration rights and so on. Atlas Shrugged also explains the heroic dimension of the creators of this world, as opposed to the parasitical class or those who simply wish to re-distribute that which others create, and it has been on the best-seller list since 1947.
My sincerest regret was that Keith Parry could not attend the listing party for Croesus on July 24, 1986, having died suddenly and unexpectedly just two months before. Nonetheless, Croesus Mining contains a lot of the spirit generated by Keith Parry.
Anyway, in the lead up to listing Croesus, I ended up back at the Kalgoorlie School of Mines to do a couple of geology subjects which I thought might be useful. They said “not you again” and I’m always threatening to go back for what will be the fourth time because the older I get, the more interested I become in knowledge.
Here are a few quick facts on Croesus Mining:
- The company was named after King Croesus who was the King of Lydia (now Western Turkey) and he was the first ruler in the world ever to mint gold coins.
- We also lived in Croesus Street, Kalgoorlie and we put the company together initially on our kitchen table and it operated out of our home for the first year of its existence.
Listing Croesus Mining
We listed in 1986 raising $2m and, after nine months of exploring, we were down to just over $500,000 with no sign of cashflow. So we made a $20.3m acquisition from CRA (now Rio Tinto) of their gold interest in the Kalgoorlie region. Perhaps smaller companies use more innovative financing. I recall that CRA wouldn’t initially talk to us in the tender process because we had no credit rating and their insistence was that we fronted up with a Letter of Credit from our bankers. Westpac were understandably unwilling to give us a Letter of Credit for $20m but I asked how much they would charge if we only wanted to borrow a Letter of Credit for the morning. Their answer was $25,000 but I had to promise to have it back to them by noon. That enabled Croesus to be included on CRA’s tender list, but it was a bit embarrassing when CRA asked to keep the Letter of Credit. They eventually settled for keeping a photocopy and I managed to get the original back to Westpac at two minutes to noon.
John Oliver (another School of Mines mate of mine who subsequently co-ordinated WMC’s Kambalda nickel operations right through to production) was my adviser and this enabled us to justify a bid of $20.3m. John had good connections with Bank National de Paris (BNP) and we brought that bank’s chief over from Sydney to look over our proposal and they agreed to finance us.BNP took copies of all the data and sent it off to Paris who confirmed that, technically, our courageous bid was sound.
Subsequently, our bid won the tender and at 3pm that day I phoned BNP in Sydney (just before they went home). Their Australian Manager said he would telephone Paris who would just be starting their day (at that time). He phoned me back saying that they were delighted and that their mining engineer would next be visiting Australia in about 9 months’ time, and that they would then be in a position to discharge funds at that time.
As we had to have the 10 per cent deposit (i.e. $2.03m) into CRA by noon the next day (remembering we only had $500,000 left ourselves), with 21 days to pay the balance, I somehow knew that we were wasting our time talking further with BNP. My main concern at that moment was not only missing out on the deal but also how was I to explain to the auditors the $25,000 payment to “borrow” a Letter of Credit?
Anyway, after about an hour in the toilet, I received an abusive telephone call from London. A stockbroker friend of mine had read on the Reuter’s wire the details of the transaction and was upset at not being given the opportunity to participate. So I said, “don’t worry, there is still time. If you place some Croesus shares right now with your UK clients and if you promise to have $2.5m deposited in our bank account by 10am tomorrow morning, you can be part of this exciting story.”
That worked, and getting the other $18m together over the next 21 days, in a mixture of share placements and loans was equally exciting. But with a lot of help from some very supportive friends and colleagues, we got it over the line.My father always told me never to borrow money “to bet on horses or look for gold”, but I felt comfortable about borrowing money against the proven gold actually in the ground.We managed to pay off all debt within 9 months, from the mining of that gold.
More recently, in 2002, Croesus jumped a few similar hurdles when we took over Central Norseman Gold Corporation. Our bankers asked if we were really serious when we set out to borrow $60m which, they reminded us, was “twice our current market capitalisation”. We got this away okay, have since repaid all debt and we’ve now emerged with a market capitalisation of $150m.
Today, Croesus employs approx 420 people and we have an incredible young team of operators, who manage to motivate me and keep my eye on the future. We know that we will only be able to succeed and take advantage of the exciting opportunities in the future, if every one of us continually reinvents our selves as a way of coping with the challenges and impediments we are likely to confront.
Here we are in 2004
This just about brings us up to the present, and I’m supposed to say what I do with my time. For many years I’ve locked myself away for the first week of each year and studied my previous year’s goals, failures and successes; setting out to design the coming year in a way that will be more effective.I’m a hard task-master, always critical of things unfinished, thinking that I should have achieved so much more. But when you actually come to complete each year’s report, it’s amazing how all the minor victories contribute to a steady advance. This is not measured by money, but by achievements.
I’m not a spectator of anything. I’d rather be in there, even doing something badly, rather than simply watching someone doing really well. The activities “pie chart” for this year splits into four roughly equal segments.
Segment #1: That involves being Chairman of two public companies, Croesus Mining which I’ve already mentioned, the other is DeGrey Mining Ltd which, in its relatively short life, is giving me a buzz and is shaping up to be another success story for the shareholders.
Segment #2: Running the private family company Mannwest Group Pty Ltd which was started by my grandfather WG Manners. He himself was the son of a Scottish ship’s carpenter who jumped ship after falling in love with a passenger. He followed her to Ballarat where he became a prospector and ended up in gaol at the Eureka Stockade Rebellion. Subsequently, the family was quite ashamed of this event, but I’m rather proud of him because the Eureka Stockade Rebellion was Australia’s first tax revolt. I think all the prospectors went to jail. As a result of this connection I’ve been invited to speak at this year’s 150th celebration of the Eureka Stockade in December.
Our family business will celebrate our 110th anniversary next year with a bottle or two. What are we celebrating? Over that 110 years we have fed, clothed and educated four generations of our family. We have employed and trained over 1,000 people and we have always paid our bills, so there have never been any victims. So can I be excused for smiling quietly when pimply-faced kids lecture me on how to run a “Sustainable Business”?
Segment #3: Running the Mannkal Economic Education Foundation. This segment will continue to expand in size as the other segments reduce.
Segment #4: Writing. This is a rather lonely occupation as you sit into the early hours of the morning staring at a blank piece of paper watching the beads of creative blood as they are squeezed from your brain to become words. I’ve produced three books so far and I’m about to start on the fourth book. After this morning’s talk I think I’ll call the next book Heroic Misadventures.
To me, nothing is more satisfying than holding the finished product in my hand. I’m then no longer able to tamper with it, I can’t make any more corrections, I can’t tweak it any further. It has a life of its own. Equally satisfying is a steady flow of correspondence from the many readers.
How do I lock in these four “separate activities” and confine them so I’m always conscious of knowing in which segment I’m operating? Not easy. And if I’m not careful, the public company activities (where everyone else thinks they own you) threaten to take over.I know that if I want to score a victory for one of the other three segments I have to get in early each day and seize that little goal for myself.
Perhaps that’s what Henry David Thoreau had in mind when he said “seize the day!”. It’s all so important to completely separate these segments as your colleagues in each, have little interest in any others. In that way, it’s a game.