Joe Gutnick Is Making A Comeback With A $20m Listing Of Paradise Phosphates


joe-gutnickIn his St Kilda Road office in Melbourne, Joseph Gutnick reaches for the Paradise Phosphate prospectus that marks his serious return to the local mining lists.

He turns to the inside back page, reading slowly and methodically from the corporate directory. “Lead manager: EL&C Baillieu. Legal adviser: Freehills. Investigating accountant: KPMG,” he says, his face creasing into a broad smile.

“Times have changed, haven’t they?”

Times have indeed changed. In 1995, in one of the more shameful episodes in Australian business, Gutnick was the target of an anti-Semitic tirade in taped conversations involving brokers at blue-blood Melbourne firm JBWere.

The tapes, which emerged three years later in an insider trading trial, proved what many had suspected for a long time — that a virulent strain of anti-Semitism existed in some of the nation’s oldest institutions.

Even as president of the venerable AFL club Melbourne from 1996 to 2001, Gutnick recalls meeting people in the stuffy MCG Long Room who “got me nervous from time to time”.

Surprisingly, he never felt the same uneasiness mixing with the club’s grassroots supporters; it was only the so-called elite.

Gutnick is not suggesting the JBWere culture of the 1990s also infected the three advisory firms in the Paradise prospectus.

He’s just celebrating a near-complete breakdown of attitudes that, not so long ago, seemed pretty much immovable.

“I was telling the family the other day that sometimes I used to walk down Carlisle Street or Hotham Street (in Caulfield, the heart of Melbourne’s Jewish community), and you used to get guys driving past and swearing: ‘Bloody Jew’, but it doesn’t happen much any more,” he says.

“Lots of guys do business with their yarmulkes (the skullcap worn by Orthodox Jewish men) on. Then again, some other people look a lot worse — they’ve got three earrings in one ear and another one through their nose!”

It was in 2010, after a decade-long hiatus following the controversial collapse of his Centaur Mining nickel venture, that Gutnick again joined the nation’s seriously rich, with an estimated $300 million fortune.

With 11 children and a daughter who has just given birth to triplets, he’s not the type to blithely dismiss the amenity and comfort that wealth provides.

How many grandchildren does he have? “A lot,” Gutnick says, again smiling. “More than I have children.”

Unfortunately for the less well-to-do, the businessman dismisses the popular notion that wealth is unrelated to intrinsic happiness.

He admits he was “a little bit despondent” in 2002-03 after the Centaur collapse, when he was virtually bereft of meaningful projects.

“I’m more energetic now than I was then,” he says. “Now I have lots of good projects and I’m excited.”

In Gutnick’s expansive office, two features dominate, both of them reinforcing his life’s mission.

On his desk sits a bank of trading screens that keep track of a disparate collection of resources and other investments, while the far wall is adorned with a floor-to-ceiling portrait of his spiritual adviser, rabbi Menachem Mendel Schneerson, who died in 1994.

For Gutnick, the rabbi has been part-inspiration and part-tormentor, ever since he famously predicted that the mining entrepreneur’s wealth lay in discovering diamonds. Gutnick owes his nickname “Diamond Joe” to Schneerson’s prophecy.

It’s ironic his return to serious public-company life, which he openly concedes will not be welcomed by everyone, is through a phosphate venture that aims to achieve lift-off from a surge in demand for fertiliser, for which phosphate is a key ingredient.

Armed with the timely $US100m proceeds from a 2008 placement by his Legend International, which is listed on the US over-the-counter market and boasts George Soros as a 10 per cent investor, Gutnick picked up the Paradise phosphate assets near Mount Isa, in Queensland, for a song.

He fervently believes a global food shortage will create an agribusiness and food boom outlasting anything the resources industry has ever had to offer.

The $20m Paradise listing, which has been delayed for a month until October 15, will see ownership of Legend’s phosphate assets transfer to Paradise in return for a 58.8 per cent shareholding.

Acorn Capital will hold 17.7 per cent and new investors the remaining 23.5 per cent.

The plan is to spend the proceeds from the float to complete a bankable feasibility study, with Paradise expected to make a final decision on mining operations around the third quarter of 2013.

After that, $26.4m would be raised for mine infrastructure ahead of start-up a year later.

The big-ticket capital project would be an $800m fertiliser and beneficiation plant, which separates the phosphate from sand and clay in the slurry.

If Paradise reaches that stage, Gutnick says he will seek an international partner to share the cost.

“I wouldn’t have $9 billion in debt, that’s for sure,” he says, in reference to old sparring partner Andrew “Twiggy” Forrest’s debt-laden Fortescue Metals.

“Paradise is a massive resource, we’re close to the coast, it’s much easier getting our product to Asia than from elsewhere, and there’s one other similar company in Australia, Incitec Pivot, and they’ve got a monopoly.”

With volatile markets and extreme risk aversion, the Paradise float has been no walk in the park.

As a result, the plan to list this month has been delayed until next month, with the company believed to be negotiating an offtake agreement with a potential cornerstone investor to smooth the process.

It should come as no surprise that Gutnick was searching for diamonds, trying to fulfil the prophecy, when he hit paydirt with phosphate. “But it’s still mining!” he protests.

While the phosphate price has halved from its pre-financial crisis high of $US400 a tonne, causing a big dip in Legend’s share price, the Paradise assets have acquired some lustre because of relatively tight global supply.

Demand for fertiliser also could surge if food shortages escalate because of persistent drought in the US — the world’s largest producer of corn and wheat.

Whatever comes of Paradise, though, it’s clear that Gutnick will experience that calming sense of fulfilment only if he succeeds in diamonds.

Gazing at the rabbi’s giant portrait, he taps his desk to emphasise each word as he says: “I have to operate and make a success of a diamond mine.”

For a moment he’s deadly serious, before lapsing into self-deprecation. “I remember asking the rabbi: ‘Can you tell me where to drill?’

“He thought I was nuts! He said: ‘Ask the experts . . . Not me.’ ”

Gutnick’s diamonds obsession brings discussion back to the early days of runaway bull markets in the 1980s, when, in his early 30s, he was profiled in a national business magazine as the “Man who makes share prices dance”.

After the 1987 crash, a wounded Gutnick regrouped, later emerging to operate the Jundee and Plutonic goldmines in Western Australia through his Great Central Mines.

Robert Champion de Crespigny’s Normandy group took over Great Central in 1999, leaving Gutnick to attack a nickel laterite project — through Centaur — with his customary vigour.

It was the circumstances surrounding Centaur’s collapse in 2001 that created a wave of resentment against him.

Insolvent trading allegations, investigated by the corporate watchdog for 14 months, focused on transactions that saw Centaur incur an extra $36m of unsecured debt.

Ultimately, the investigation came to nothing, but there are those who say Gutnick will never again be welcome in Kalgoorlie.

“I was (Centaur) CEO at the time and I take responsibility,” Gutnick says. “I feel bad about it and there were numerous reasons it didn’t go right, including the nickel grade and prices at the time.

“But I also remember BHP Billiton’s laterite project Ravensthorpe went $2.5bn over cost and they sold it, so I don’t feel so bad.

“I’m sorry about Centaur, but I’ve also spent hundreds of millions of dollars drilling in Kalgoorlie and on the industry there.”

As with the 1987 crash, Gutnick went quiet after Centaur. The way he puts it, he just went exploring.

But there was also the Legend spin-off in the US, the phosphate find in Queensland, an opportunistic capital raising by Legend and, well, the perennial diamond hunt.

“I used to scratch my head and think to myself: ‘Where the hell am I ever going to find diamonds?”‘ Gutnick recalls.

“I’ve tried everything I possibly could, and I’ve spent tens of millions. It’s difficult to find any kind of deposits in Australia, never mind diamonds.”

At the height of the financial crisis, he pounced, with cashed-up Legend taking a 55 per cent stake in North Australian Diamonds, operator of the Merlin diamond mine in the Northern Territory once owned by Rio Tinto.

Gutnick is finally producing diamonds, but at nowhere near the scale to validate Schneerson’s prophecy.

To do that, he needs to find rich, diamond-bearing kimberlite pipes, with the help of the meticulous Merlin data kept by Rio.

“My mining career is far from over until I’m a major diamond producer,” he says.

Gutnick’s obsession is a diamond version of Gina Rinehart’s dream to fulfil her father’s ambition of owning and operating an iron ore mine.

For him, the riches flowing from diamonds would be different to phosphate.

“If suddenly we’re successful in phosphate by the price going up $US100 a tonne, Paradise would become a cash cow,” he says.

“But if someone comes to my office and offers me $100m for my diamond mine, I wouldn’t sell it.

“It’s not all about money. I’d like to make $100m, but I’ll make more than that on this mine.”

Gutnick’s Lazarus-like return has not yet put him in the oligarch category of wealth enjoyed by Rinehart and Forrest.

While he likes Rinehart, he says: “I’m not her great fan.” Even so, he will passionately defend her, and the other oligarchs for that matter, against efforts by Wayne Swan to “demonise” them.

“I don’t know what that man (Swan) wants,” Gutnick says despairingly.

“Twiggy, despite everything that’s said about him, has come from nowhere and built an empire. It’s an absolutely fantastic achievment.

“In the US, these people would be lauded.

“But this government is finished. It’s on its deathbed. People are fed up with all the lies and stupid talk.”

And Rinehart? Does she deserve to be in the same category as Forrest, when she was given a substantial start in life from her father Lang Hancock?

“Lots of legacies are handed down and it’s all blown up,” Gutnick says.

“Well, she hasn’t blown it; she multiplied it, so all credit to her.”

As for his own situation, Gutnick believes he’s much better placed than in previous incarnations as a share shuffler in the 1980s, a gold producer in the 90s and a nickel entrepreneur in the early noughties.

Mind you, at today’s $US1600-an-ounce gold price he says he’d be a billionaire if he’d been able to keep his gold assets.

“But it was a different world back then, with a gold price of $US270-$US280,” he says. “And I was debt-ridden then, but I’ve got virtually no debt in my companies.”

What about his personal debt situation?

“Fine, but you’ve got to have some debt,” he says. “Otherwise the banking system would collapse!”


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  1. Yes he has given generously to those who sought his help and we are very grateful to him. The world of business is a tough place for sensitive souls. May his Mazal shine for many years.