Brian Tobin’s political Rolodex helped him save a mining company and made him rich in the process.The former premier and federal minister finalized the sale of Consolidated Thompson Iron Mines for $4.9 billion to Cliffs Natural Resources Inc. of Cleveland in May, the biggest completed acquisition in the metals industry in the first three quarters of 2011, according to analysts.
Tobin, who was president, CEO and board chairman when the company was sold, made tens of millions through the sale of his shares in the company, the biggest deal by far during his eight years in business.
The success dates back to his sharp use of political contacts during Consolidated Thompson’s darkest days in early 2009.
The meltdown of global markets the previous fall decimated the company’s stock and the up-start iron ore producer looked headed for a cliff.
Tobin and his colleague, Richard Quesnel, had nursed Consolidated Thompson’s only asset, Bloom Lake, a stretch of land on the Quebec-Labrador border, from a vacant lot of “trees and caribou” into a busy mine site under construction when the recession hit hard.
“We were burning through $20-25 million a month building this big mine,” said Tobin from his home in Manotick. “We were about halfway through the process and we knew we were going to run out of money.”
A mine has two options at a time like this, said Tobin. They can either sell more shares, which dilutes the worth of those already issued, or stop construction and wait out the storm.
But Tobin’s background in politics paid off mightily in the crisis.
A big enthusiast of former Prime Minister Jean Chretien’s Team Canada trade missions, he travelled to China on the junket as premier, and also on trips done independently by Newfoundland and Labrador.
“During my time in political life, I had visited China a number of times,” he said. “I had developed a number of relationships with people who at the time were mid-level officials or junior officials, some of whom went on to become senior folks in various organizations.”
Tobin wouldn’t name the individuals he befriended back then, but he did meet with people from all the major banking and financial institutions in China, he said.
“One of the people who was a junior official visited Canada when I was a minister here,” he said. “I took him to an Ottawa Senators hockey game and brought him to my house for dinner and that kind of stuff, which, in the context of developing a relationship with the Chinese, friendships matters.
“The individual went on to become the CEO of a very large corporation in China. At the time he was a deputy premier-level official.”
By working those contacts, Tobin arranged a meeting with the top brass of the country’s third biggest steel producer, the Wuhan Iron and Steel Corporation, or WISCO.
He traveled to Wuhan, China, in the spring of 2009 as chairman of Consolidated Thompson with Quesnel, who was then both CEO and president.
WISCO sits on a 21 square kilometre complex in Wuhan, the capital of Hubei province in central China. Opened in the 1950s, the site greets visitors with a towering statue of Chairman Mao Tse-tung at its entrance, said Tobin.
Inside, another chairman awaited them: WISCO’s Chairman Deng Qilin, an industry bigwig who also headed the China Iron & Steel Association at the time and was a member of China’s National People’s Congress, said Tobin.
“We spent days locked up in a negotiation session with WISCO, telling our story, getting them interested in becoming an investor and by the end of the day, we had a framework agreement which provided for them to invest up to $240 million a year in our company,” said Tobin.
A WISCO executive joined Consolidated Thompson’s board and WISCO promised to buy up to 60 per cent of the iron ore that would eventually leave Bloom Lake. WISCO also bought shares in Consolidating Thompson above their market price and bought 25 per cent of the mine itself, an investment rounding out at $240 million.
The deal allowed Consolidated Thompson to stay on schedule and gain the trust of investors back home in North America, who put another $120 million of equity into the company. “That became a very seminal and important event for our company,” said Tobin. “I don’t think it’s a stretch to say that it saved the company.”
Bloom Lake began processing ore nearly a year later in July 2010. After travelling along a commercially owned railroad to Sept-Iles, Que. on the Gulf of Saint Lawrence, the ore was loaded onto ships, most of it bound for China.
Cliffs Natural Resources Inc., a major American iron ore producer, began making overtures to buy Consolidated Thompson a month later, but was rejected several times.
It wasn’t until November 2010, after Quesnel resigned from the company due to an insider-trading conviction and Tobin took over the company, that Consolidated Thompson was sold for $4.9 billion. Quesnel is appealing his conviction.
Since he left politics, Tobin has been the consummate businessman. He’s worked for Frank Stronach at Magna International Inc. and sat on the board of companies as diverse as Lion’s Gate Films, AECOM, and Marport, a St. John’s-based sonar technology company that supplies defense contractor General Dynamics.
But his politically connected background pays off mightily in the world of mining, where he’s spent of his most time.
His biography on the Fraser Milner Casgrain website, the law firm where he’s kept an office since leaving politics, boasts his expertise is China.
“I put in the time to build the relationships and the consequence of that was when we needed to go to China I was able to pick up the phone and get an introduction to the folks who ultimately became our partners and was introduced at a very high level,” he said.
Tobin said his contacts in provincial and federal governments in Canada weren’t something he used to push Consolidated Thompson ahead on home turf.
“There are no shortcuts,” he said, of Canada’s regulatory system for mining.
He was aware of the iron ore deposits in Labrador at a regulatory level, but gained no insider knowledge of Bloom Lake while in politics, he said.
“The Bloom Lake deposit wasn’t really identified at that time,” he said.
Consolidated Thompson did hire him because of his expertise in navigating through three different governments (Quebec, Newfoundland & Labrador and Canada,) he said.
Tobin, whose personal wealth skyrocketed after the Consolidated Thompson deal, is now focusing on Norvista, a merchant bank that funds several small exploration firms in Quebec, Mexico and Columbia.
His new status as mining kingpin has brought with it folks who want him to invest his money in their mining plays. During an interview in October, he said he had 14 different mining portfolios waiting on his desk.
Former Canadian politicians and diplomats are deeply involved in increasing trade with China.
The Balloch Group, a financial advisory firm lead by former Canadian ambassador Howard Balloch and now renamed Canacord Genuity, was WISCO’s advisor during the Consolidated Thompson deal. Former federal ministers Stockwell Day, John Manley and Martin Cauchon all attended a Canada-China Business Council meeting in November in Beijing.
Original Article
Source: iPolitico
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