Nathan Tinkler became Australia's youngest billionaire in record time thanks to a series of aggressive bets on the country's coal mining sector.
But the man who started his career as a pit electrician acknowledged on Thursday he may have attempted one risky deal too many, leaving him with an undiversified portfolio that was heavily exposed to plummeting coal prices.
"I got left holding the can," Mr. Tinkler told an Australian court during a grilling about his failure to pay junior coal explorer Blackwood Corp. Ltd. $28.4-million Australian ($29.1-million U.S.) for an agreed share placement deal.
Mr. Tinkler, 37, flew in from his home in Singapore to take the stand – the first time he has faced public scrutiny since creditors began chasing him to recover millions of dollars in unpaid debts.
Along with other Australian mining barons, such as heiress Gina Rinehart, the eccentric Clive Palmer and Fortescue Metals Group Ltd.'s Andrew Forrest, Mr. Tinkler is facing a sharp tail-off in the country's wealth-generating decade-long mining boom.
But unlike his peers, who have businesses stretching across sectors including iron ore and gas, the young upstart put all his eggs in the coal basket.
Mr. Tinkler had so much faith in the coal industry, he revealed to the court on Thursday, that he had begun talks with Blackwood to buy assets from Brazilian miner Vale SA even before the share placement had been completed.
Instead, Mr. Tinkler said he – and everybody else – was caught out by a sudden downturn in the coal market that led his prospective financial backer for the deal, commodities house Noble Group, to leave him in the lurch.
"I had a clear path to fund this – that path fell away and market conditions changed," he said.
A Noble spokesman said he had no comment about Mr. Tinkler's statements.
Mr. Tinkler had been threatened with arrest if he did not appear in court on Thursday after losing a legal bid to stop the examination going ahead.
Wearing a slightly too-large navy suit and looking slimmer than he has in previous public appearances, Mr. Tinkler said he had believed he had an agreement with Noble to buy his royalties from Yancoal Australia Ltd.'s Middlemount mine, which he valued at $25-million to $30-million (Australian).
But under repeated questioning from Robert Newlinds, the lawyer for liquidator Ferrier Hodgson, Mr. Tinkler acknowledged there was no written agreement or "letter of comfort" from Noble, a long-term business partner, about the royalty deal.
"I certainly wish I had done that," Mr. Tinkler told the court.
"I had a strong working relationship with Noble," he said, noting deals of much larger value he had conducted with the commodities trader. "I had no inkling that I would need to go to that level of certainty, or comfort if you like, to put that in place."
He said he was unsure if he had made notes or exchanged e-mails with Noble executive William Randall on their talks.
Mr. Tinkler also mentioned preliminary talks with major lenders about potential financing for the deal, including the use of three of his houses in Australia worth up to $20-million as security.
Mr. Tinkler made his fortune selling a coal tenement in 2007, only to lose his billionaire status when coal prices slumped last year. At the peak of Australia's once-in-a-generation resources boom, he spent millions on racehorses and sports clubs.
He has been forced to sell assets including horses from his large stable. Liquidators have seized his private jet and helicopter.
The Blackwood case is one of a series of lawsuits against the former billionaire over unpaid bills and commercial disputes that have raised questions about the future of his main asset, a near one-fifth stake in Whitehaven Coal Ltd., Australia's largest independent coal miner.
Whitehaven's shares have plunged more than 25 per cent since the start of the year following a profit downgrade and the announcement of a management reshuffle, leaving the value of Mr. Tinkler's 19.4-per-cent stake – once worth more than $2-billion – at just over $500-million.
That's less than a $600-million loan that sources have told Reuters he owes against that stake to his main backer, U.S. hedge fund manager Farallon Capital Management LLC's asset manager Noonday.
Noonday, which heads the loan consortium that includes Credit Suisse Group AG, has been looking at options including pressing for the sale of shares or converting some of the loans into equity, sources have told Reuters.
If liquidators find that Mulsanne cannot cover the Blackwood liability, Mr. Tinkler could face charges or fines for insolvent trading.