Tim Poole, who succeeds John Prescott as chairman of rail giant Aurizon in September, faces a major decision on whether to cancel, postpone or proceed with the company’s ambitious and expensive Pilbara expansion plans.
Would Aurizon have bid for Aquila in 2014 if it had foreseen the trajectory of iron ore prices?
Aurizon holds an exclusive contract to develop a railway for the West Pilbara Iron Ore Project, after it joined forces with Chinese steelmaker Baosteel to acquire Aquila Resources in a $1.1bn bid in 2014.
Together with mining partners POSCO and AMCI, the companies aim to develop a 40mtpa iron ore mine, rail and export project, with Aurizon building and operating the 430km rail link between the mine and a new port facility at Anketell, 30km up the coast from Dampier.
But since the partners took over Aquila in 2014, the iron ore price has plummeted and the project looks ambitious particularly as junior miners collapse and the majors concentrate on shaving their production costs.
Despite Aurizon slowing the timetable for the West Pilbara project, major shareholder Perpetual has urged Aurizon to shelve its Pilbara railway plan.
Perpetual, which holds 6.28% ownership in Aurizon, doesn’t think the delays are adequate to respond to the iron ore slump, however.
Instead, the fund manager wants Aurizon to shelve the project completely, and focus instead on delivering benefits to shareholders elsewhere in the business.
“Management should be focused on delivering on cost out opportunities in the operating business, improving free cash flow and distributing this to shareholders,” Perpetual Australian equities head Paul Skamvougeras was quoted as saying in multiple Fairfax outlets in May.
“Aurizon’s strong balance sheet gives the company flexibility to pursue genuine growth opportunities when they arise [but] the Western Pilbara Iron Ore Project is not one of them.”
Tim Poole is a very experienced infrastructure investor.
He spent 12 years building Hastings Funds Management, including two years as managing director from 2005 to 2007.
He chaired Aurizon’s arch rival Asciano from 2007 to 2009, a tumultuous period which saw Asciano’s share price plummet as it entertained an ambitious takeover plan for container and palleting specialist, Brambles.
Mr Poole is currently chairman of the investment committee of AustralianSuper, chairman of infrastructure debt investor Westbourne Capital and chairman of Lifestyle Communities Limited. He is also a non-executive director of Newcrest Mining Limited, McMillan Shakespeare Limited and Japara Healthcare Limited.
Mr Poole holds a Bachelor of Commerce from University of Melbourne and is a Member of the Institute of Chartered Accountants.