Obeid family and friends reap millions from lucrative
coal licences
Date May 21, 2012
Kate McClymont, Linton Besser
Eddie Obeid ... his friend won a coal exploration licence worth millions of dollars in a controversial tender. Photo: Jon Reid
A FRIEND and financial adviser to Eddie Obeid and his family, who had no mining background and a $1
company, won a coal exploration licence worth millions of dollars in a controversial tender run by the disgraced
former resources minister Ian Macdonald.
A Herald investigation can also reveal the Obeid family received at least $10 million after they sold an option
over their land to one of the successful bidders in this tender for a separate licence. The Obeids had bought the
farm in the Bylong Valley, near Mount Penny, for $3.65 million nine months before Mr Macdonald announced
the tender.
Not long after they bought the farm, Mr Obeid's son Moses told one friend his family had a stake in a mining
deal that could be ''a life-changing investment''.
Moses Obeid ... told one friend his family had a stake in a mining deal that could be "a life-changing investment". Photo:
Kate Geraghty
He tried to organise his family's associates to buy nearby plots because, he said, ''we can't be seen to be buying
them all''.
The revelations come after the Herald revealed on Saturday that an Obeid family trust was the secret beneficiary
of three lucrative government leases at Circular Quay hidden behind a front company run by Mr Obeid's
brother-in-law.
In recent evidence given to the NSW Court of Appeal, Moses Obeid said it was Andrew Kaidbay who had
''obtained [information] from the family trust'' to personally negotiate with the National Australia Bank on the
family's behalf to secure a home loan.
Cherrydale Park ... owned by the Obeid family. Photo: Brockwell Perks
Mr Kaidbay, 36, a Bankstown mortgage broker, was granted one of the exploration licences, at Ferndale in the
Hunter Valley, in 2009. He and his father have known the Obeids for many years.
Six weeks after being awarded the licence, the $1 company, Loyal Coal, sold 90 per cent of the project to
established miner Coalworks for $2.4 million. It later sold a further 2.5 per cent for 6 million share options. The
remaining 7.5 per cent could still earn its holders tens of millions of dollars a year over the life of the Ferndale
project.
Records from the Australian Securities and Investments Commission indicate these people hold this stake
through a company called Mincorp Investments. Its registered office is that of the Obeid family's long-time
accountant, Sid Sassine. Mincorp is partly owned by a company registered in the British Virgin Islands, which
the Herald has established is owned by Gardner Brook, an elusive merchant banker who had previously held
talks with the Obeid family and Mr Kaidbay over the leases at play.
On paper, the biggest stakeholder in Mincorp is Mr Kaidbay. When asked if the Obeids had any interest in this
stake, Mr Kaidbay told the Herald by text: ''I hold my shares legally and beneficially, ASIC records confirm
this.''
Last year Coalworks' Chris Hagan told Angus Grigg of The Australian Financial Review that he was
endeavouring to find out the identity of these investors. But the company recently told the Herald that due to
''confidentiality obligations'', it would not provide further details.
Mr Kaidbay and Mr Brook are sitting on a potential fortune. Coalworks is at the centre of a takeover bid by
Whitehaven Coal offering $1 a share. A merger would create a $5.1 billion entity.
The proposed mine in the Hunter Valley, roughly 125 kilometres from Newcastle, is slated to start production in
2016 and the Mincorp interests stand to earn up to $40 million a year for their 7.5 per cent cut.
The original tender for 11 coal exploration licences across NSW was controversial because it was by invitationonly. Apart from Ferndale, the tender included Mount Penny, 60 kilometres from Mudgee, where the Obeids
and their friends had bought land. It is not suggested the Obeids influenced the outcome of the tender.
One associate said ''Mo'' Obeid often bragged to a coterie of friends at the Latteria coffee shop in Darlinghurst
about the coal deal. ''This is going to be a life-changing investment if it comes off,'' Moses told another
associate, explaining there was coal under the property.
''There's millions of dollars in this deal,'' Moses said, urging him to buy a neighbouring property.
The two people who bought properties in 2008 were courier company owner Justin Kennedy Lewis, 40, who
paid $2.47 million for one, and John Campo, a Gladesville accountant for several Obeid associates, who paid
$600,000 for another.
Mr Lewis, a childhood friend of the Obeids, has denied being aware of any coal in the valley. Two years ago he
told the Herald: ''I have always wanted a proper working farm and - especially now I'm a new dad - was looking
forward to getting rough and ready with my son.'' Moses Obeid has said he was surprised to find his childhood
friend had bought in the same area.
Documents tendered in a recent court case show in October 2010, the Obeid Family Trust No. 1 transferred
$100,000 to Mr Lewis.
The eventual winner of the Mount Penny licence, Cascade Coal, confirmed it has paid the Obeid family and
their fellow landholders a multiple of the value of the land. Cascade negotiated these deals with Mr Kaidbay and
Mr Brook, who represented the Obeids and their associates.
The Cascade director John McGuigan said ''we were offered through him [Mr Brook] the opportunity to …
acquire to get the rights over the relevant parcels of land''. Another Cascade director, Richard Poole, confirmed
dealing with Moses Obeid and Mr Brook over the land.
Cascade director Brian Flannery has previously stated the company took options over four or five key properties
in the area, including the Obeids'. ''Companies generally pay multiples [of the value] for the farms,'' he said.
Eddie Obeid has said he bought the farm well before Mr Macdonald announced the tender because he fell in
love with the area. The former mining minister told the Herald in 2010: ''I personally wish [the mine] would
never happen.''
But a year after the purchase, Mr Brook was telling another tenderer, Monaro Mining, that Mr Obeid's family
was interested in investing in the mining licence over the Obeids' farm, Cherrydale Park.
''GB [Gardner Brook] advised as follows … One or more of the Mt Penny property owners, together with other
3rd parties are interested in providing … initial DPI [Department of Primary Industries] funding,'' a December
2008 Monaro Mining memo said. Generally, exploration licencees fund feasibility work under an agreement
with the government.
Mr Brook, who was advising on Monaro's tender, also suggested he may have had inside information on how
the tender was progressing: ''Recent advice by G Brook has indicated that [our] expression of interest for the Mt
Penny [licence] is on track with its proposed DPI contribution significantly ahead of its competitors''.
After Monaro pulled out of the tenders, Mr Kaidbay stepped in to take over its bids and changed the name to
Loyal Coal. When Mr Kaidbay's company won three licences under the tender (it later handed back two), the
coal industry was stunned.
Back at Mount Penny, 40 per cent of Cascade remains hidden through nominee companies. When asked the
identity of the other shareholders Mr McGuigan said: ''There's a bunch of, you now, well-known business
people … I am not going into that because it is a private company.''
After obtaining the Mount Penny and Glendon Brook licences for $1 million in December 2010, Cascade
offered to sell them to the publicly listed miner White Energy for $500 million.
Five of the White Energy directors - Travers Duncan, Brian Flannery, John Kinghorn, Mr McGuigan and John
Atkinson - were also part-owners of Cascade. Along with Richard Poole, the group owned 60 per cent of
Cascade and stood to make about $60 million each if the deal went ahead.
Last April, White Energy shareholders rejected the offer.
Mr McGuigan told the Herald he had had ''a gutful'' of the speculation about the Mount Penny mine. ''If we get
development approval we are about to spend $500 million'' but this ''scuttlebutt … is undermining the quality of
a decent asset''.
Mr Obeid and Mr Macdonald did not respond to questions.