Mining Macs go separate ways

DEEP TROUBLE: A coal mine in Queensland's Bowen Basin. Mining magnate Bill McDonald's lease 162 in the Basin is at the heart of an ongoing dispute. Source: The Daily Telegraph

YOUNG mining magnate Bill McDonald will today hand back $360 million to Macarthur Coal and end an increasingly bitter joint venture agreement to develop a coalmine in the Bowen Basin.

The 38-year-old Brisbane entrepreneur, with an estimated worth of more than $130 million, is defending court action by Macarthur, which is demanding he and his MCG group of companies execute an agreement to sell 90 per cent of mining development lease 162.

Macarthur's statement of claim, lodged on May 24, says the company would seek the repayment of a $360 million loan, plus interest and damages, if the venture did not proceed.

But Mr McDonald and a group of related companies, including MCG Coal and Fortrus, have hit back in a defence claim, arguing Macarthur has "acted in bad faith" with no intention of developing the lease.

Mr McDonald alleged Macarthur had "failed to act with clean hands" and "preferred its own interests to the best interests of the joint venture" by amending his preferred development model.

Mr McDonald and MCG allege that in a meeting in February or March this year, Macarthur development manager Garry Lee told MCG that "Macarthur did not intend to conduct mining operations in respect of MDL 162 in accordance with the MCG model".

Macarthur had instead preferred its own model, which reduced the estimate of available coal to 85 million tonnes and said it would adopt "a more intensive washing process of the coal not contemplated in the MCG model which resulted in greater expense... and reduction of the percentage of coking coal", the defence claim said. Mr McDonald said this made the lease uneconomical and "frustrated the primary purpose of the joint venture".

Mr McDonald will today pay back the $360 million, plus interest, and will defend any damages case, his lawyers said.

It follows a similar claim by billionaire Chris Wallin who, with joint venture partners, has a $1.9 billion lawsuit under way against Macarthur with claims the listed company failed to develop its Monto thermal coal project in a timely manner.

Mr McDonald made his debut on BRW's Young Rich List last year with estimated wealth of $132 million, based on interests in quarries, mining services and a number of coal tenements.

As with Nathan Tinkler's rapid rise to riches, Mr McDonald appeared to have struck black gold when he bought MDL 162 off Stanmore Corporation for $275 million before striking a deal to sell a 90 per cent stake for $360 million just two months later.

The deal would have landed Mr McDonald a $50 million profit.

Macarthur went to market in August last year seeking $429 million in new capital to take the stake.

A spokesman for the company did not return calls.

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