There are several reasons for saying Forge was a dead man walking last year, not the least being a famous saying from the late Robert Holmes a Court who once commented that: “It takes a long time for people to realise that they’ve gone broke”
In the case of Forge, which died spectacularly after months of management claims that “all’s well”, the cause of death might have been a self-ingested dose of corporate poison swallowed as far back as two years ago.
But even if the problem was the takeover of the CTEC power station subsidiary in January 2012, there is the issue of who at Forge was in charge of the business for the next 25 months.
Dryblower does not know the answer to that question though there is no doubt it must have been someone close to the top of Forge and if it wasn’t then the first indication of what went wrong can be identified – it’s called management taking its eye off the ball.
There will almost certainly turn out to be other factors at work and if the corporate coroner needs a helping hand, here are a few suggestions as to where he might start looking, starting with the ill-timed attempt of Forge management to continue expanding its contracting business when the mining industry had stopped expanding.
In time that single issue, trying to grow faster than your clients, could turn out to be the primary cause of the Forge failure because as the big mining companies cut back on expansion work they also started to screw down contracting costs.
Forge management should have seen this coming because the sea change in mine development work was being clearly flagged as far back as 2012, with BHP Billiton leading the cutbacks through its decision to mothball its Port Hedland dual harbour plan and the major expansion of its Olympic Dam copper and uranium mine.
From mid-2012 – and perhaps a bit sooner – it was obvious to most people in the mining industry that the cycle had turned sour and everyone was going to take a haircut.
Forge management, however, seems to have believed it was immune from what was obviously going to be a savage downturn that would require a very close eye being kept on costs and on cash flows as mining companies tightened their payment schedules.
If there is one statement from Forge that sums up the core mistakes of trying to expand when everyone else is pulling back it can be found in a management presentation at the October 24 annual meeting when a claim was made that Forge was delivering a record performance by “defying the industry trend”
That was, even then, a ridiculous thing to say, coming straight from the Black Knight skit in Monty Python in which the knight demands that a fight continue even after he’s had his arms and legs chopped off.
The administrators and other court appointed officials are the people best skilled to conduct the Forge autopsy and while they will go back over management claims they will also be looking at the critical question of “who knew what and when did they know it”
Try as he did last week, Dryblower simply cannot join the dots that connect a company claiming on October 24 that it was delivering a record performance, generating record revenue and had $103.9 million in cash with a business that was so broke last week it couldn’t even pay its most menial workers their salaries.
What happened to the workers at Forge has stained the entire contracting industry and while shareholders are lamenting their misfortune, the pain of a failed investment is nothing like the searing agony of losing your job and having to explain to your family that you might have to sell their home because someone at head office ruined the business.
Hopefully, most of the workers will recover from what’s just happened to them.
And, just as hopefully, the official investigations into the Forge failure does not get bogged down in a pointless blame game but is able to quickly sheet home the core issues, expose the failure of management and prosecute those responsible for what is one of the mining sector’s most disgraceful moments.