Tycoon turns up heat in battle with Whitehaven board

SYDNEY/MELBOURNE Wed Oct 31, 2012 3:12am EDT

Mining magnate Nathan Tinkler in this handout picture made available October 8, 2012. REUTERS/Martyn Rushby/Handout

Mining magnate Nathan Tinkler in this handout picture made available October 8, 2012.

Credit: Reuters/Martyn Rushby/Handout

SYDNEY/MELBOURNE (Reuters) - Mining magnate Nathan Tinkler pledged to vote against all resolutions at Thursday's annual general meeting of Whitehaven Coal (WHC.AX), declaring open war on the firm in which he is the top shareholder and adding to speculation over his motives.

Tinkler wrote an open letter to shareholders in Australia's biggest independent coal miner, published in newspapers on Wednesday, to condemn a 44 percent fall, or A$2.3 billion ($2.4 billion) drop, in Whitehaven's share price since April 30.

After failing to secure funding for a $5.5 billion bid to take Whitehaven private in August, there is speculation he may want to launch a hostile bid at a lower price than the A$5.20 a share he proposed previously.

Whitehaven shares are now trading barely above A$3.00 as it faces rising costs, a slump in coal prices, an uncertain demand outlook, and difficulties on a key mine expansion.

Tinkler, who went from pit electrician to Australia's youngest billionaire, has a 19.4 percent stake in Whitehaven, acquired after it took over two companies he controlled, Aston Resources and Boardwalk Resources, in a $2.5 billion deal in April.

"Since the merger with Aston Resources, Whitehaven has had limited development success, has torn through nearly half a billion dollars, and drawn down previously unextended bank facilities, and I believe it has also incurred significant liabilities through take-or-pay contracts due to its inability to develop projects on time and on budget," Tinkler wrote in the letter.

Take-or-pay contracts force a coal miner to pay for rail capacity that it has booked whether it is able to use that capacity or not, a factor that has hurt Whitehaven and others after a dip in China's demand for Australian coal.

Tinkler called on other shareholders to join him in voting against the adoption of the company's remuneration report and the reelection of Chairman Mark Vaile and four board directors.

The tycoon would not attend Whitehaven's annual meeting in Sydney on Thursday, a source close to Tinkler Group said, adding that Tinkler was not in the country.

The source declined to comment on whether Tinkler planned to call an extraordinary shareholder meeting to try to overthrow the board if his attempt failed on Thursday.

Whitehaven Managing Director Tony Haggarty slammed Tinkler's letter, saying his "comments contain many serious inaccuracies, inconsistencies and highly misleading statements."

Haggarty did not specify what he felt was inaccurate but said the board welcomed the opportunity to answer questions from shareholders on Thursday about the issues raised by Tinkler.

WHITEHAVEN WARNS ON PROFITS

Andrew Harrington, an analyst at Patersons Securities, said the company needed to focus on its operations but instead had been forced to devote a lot of attention to Tinkler over the past few months.

"What his intentions are, it's hard to decipher," said Harrington.

Tinkler acknowledged the Whitehaven resolutions might be carried but said he wanted to send a clear message to the firm, which he did not expect would generate any profit this year.

Whitehaven warned last week after prodding by Tinkler that its profits could slide this year if coal prices weaken.

The company, which reported a 42 percent rise in quarterly coal production to 1.9 million metric tons from a year ago, also said on Friday it did not see any signs of a market rebound.

Tinkler had sought confirmation that the company's outlook for earnings before interest, tax, depreciation and amortization was close to the market consensus of A$188 million, which the company did say was in line with its current projections.

Whitehaven warned, however, that if coal prices stay as weak as they are now, EBITDA for the year to June 2013 could slide to A$50 million.

Most of Tinkler's wealth is tied up in his Whitehaven stake, worth about A$1.1 billion at its peak and now just A$600 million, with creditors circling his stable of mining, sports and horse racing businesses.

This week he is selling off 350 horses from his Patinack Farm at a three-day auction, which pulled in more than A$2.5 million on the first day.

($1 = 0.9644 Australian dollars)

(Editing by Ed Davies)

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