Twiggy (15 page)

As the money began pouring into Fortescue’s
bank accounts, work began on building a mine capable of producing 45 million tonnes a year of iron ore, a 256-kilometre railway and a deepwater port. This sounded like a big undertaking, but for Forrest it was the easiest part of the challenge. He knew that an iron ore project was far easier to develop than the technical complexities he had encountered at Anaconda.

In essence, iron ore mining
is a massive earthmoving operation supported by a logistics business. Yet it is hardly effortless. Large trucks must first remove a twenty-five-metre layer of unwanted dirt, known as overburden, that sits above the prized ore. Fortescue’s surface miners then cut up the ore and feed it into waiting trucks. From there it is crushed and the impurities removed, before it is conveyed to a train loader,
which piles the dirt onto trains. After the rail journey to Port Hedland, the ore is stockpiled until it is picked up in huge scoops and taken to the wharf on conveyors. A ship-loading machine then pours the ore onto massive vessels, which set sail at regular intervals for the hungry steel mills of China.

The biggest problem for those tasked with building the infrastructure was that they
had only a $2-billion budget when it appeared they would need at least twice that much. By 2006, the cost of labour, equipment and just about everything else in the Pilbara was skyrocketing as the resources industry began to crank up new projects in response to Chinese demand.

Forrest set up a special team, led by Alan Watling and Peter Thomas, to find new ways of doing things that would
slash the cost of the project. After four months of intense meetings, the team delivered a project plan with a budget of less than $2 billion. Peter Meurs, as the head of main contractor Worley Parsons, was taken aback at Forrest’s ability to get people to believe in improbable targets. “All of the project management things we’d learned, all of the experience [was] thrown out the window,” he said.

Forrest’s answer to the skills shortages that were engulfing the industry was to attempt to differentiate Fortescue from other miners competing for the same limited pool of labour. He began speaking of his “Fortescue family”, a leitmotif that helped create an almost evangelical aura around Forrest and the company. Fortescue’s open-plan office on Perth’s Adelaide Terrace also fostered an air
of informality and egalitarianism – values Twiggy had long seen in himself. Forrest’s own cubicle, right in the middle of the office, was exactly the same size as that of the junior accounts clerk. The Fortescue office was deliberately on the eastern outskirts of the CBD, at a safe distance from the towers of BHP, Rio and the rest of the establishment.

With characteristic flourish, Forrest
gave an insight into the unique culture he was trying to create while addressing a group of employees in the Pilbara: “Everyone here is part of our Fortescue family. You are family as soon as you step foot on to one of our projects. And what families do is love one another. Now I know that might sound a bit odd to some of you blokes. But that’s what you do at Fortescue. You love one another, you
look after your mates, you care for one another. And if you are having personal problems, any problems, you tell someone. Don’t bottle it in. If you have an idea how to do it better, you tell someone. Or you email me. That’s the Fortescue culture. You will look back and know you were part of history – like building the Sydney Harbour Bridge.”

Those who worked closely with Forrest found his
energy and penchant for risk intoxicating. They were pushed to achieve things most never believed they could. Employees in their twenties were handed responsibilities for overseeing key parts of the project they would never have been given at other mining companies. But many also found Forrest infuriating. He had a scattergun approach, which meant he was constantly coming up with big ideas that
needed to be acted upon, only for them to be ditched soon after. He also had a short attention span. Says a former colleague: “Because he’s a man of action, he doesn’t listen too often – he wants to know what the problem is, what the proposed action is, and if he doesn’t agree with you he’ll tell you what he wants to happen. He doesn’t suffer long descriptions and presentations and long documents.
He wants things distilled.”

Many colleagues also sighed at his propensity to stretch the truth and to take credit for achievements when others deserved the recognition. Forrest would also habitually keep his counsel. Says the former executive: “One thing I found annoying is that he always knew more than you did. It’s a style that enables him to keep control of what he’s doing. He often knows
little bits of the picture and you might have another part of it, and he’ll deliberately hold back those bits to his own advantage. I used to find that incredibly frustrating.”

Some executives fell out badly with Forrest. Tensions developed with marketing boss Philip Kirchlechner over his reluctance to fall into line with the gung-ho style of the company. “If I was a little bit hesitant about
telling the Fortescue story, or not optimistic enough, Andrew would say, ‘Philip, that’s negative marketing,’” he recalls. “And if he really wanted to insult me, he would call me conservative.”

Kirchlechner left the company in May 2006 because, he claims, Forrest reneged on a verbal promise to give him 300,000 shares a year. The pair had a shouting match in the office before Forrest ordered
him to leave without taking anything from his desk apart from his coat. By the time Kirchlechner was standing on the pavement outside, his BlackBerry had already been deactivated. It was a warning to others that Forrest could never be beaten in an argument. “He always thought he was right,” Kirchlechner recalls. “I had so many arguments with him and he would say, ‘I know I’m right.’ He had more
conviction about himself than anyone else I’ve ever met.”

Other executives were also bitter at not having shares or options despite their years of loyalty to the boss, whose own fortune was growing at high speed. Ed Heyting, a senior manager charged with building infrastructure, left in 2005 after a dispute over options. The hard-nosed Forrest also got rid of anyone he regarded as a naysayer.
“Their desk would be suddenly empty and they would just evaporate,” says a former executive.

Forrest admitted he couldn’t tolerate “cynics” working under him. “That will bring you undone,” he told a business audience in 2006. “Anyone who is not part of that unified vision should leave. It’s not all soft and cuddly. I learned the importance of team building at an early age while mustering
and found out pretty quick that unless everyone was on the same page, it only needed one who wasn’t to bring the whole show undone.” Despite his ruthlessness, some employees also recall Forrest’s genuine acts of kindness, including visiting injured or sick workers in hospital and offering to help colleagues move house.

Forrest also wouldn’t tolerate being told that something was impossible,
even when engineers who knew much more than him were saying it couldn’t be done. Alan Watling, who had been with Fortescue since the beginning, finally snapped one day in 2007 when Forrest demanded that he build the railway several months faster than previously agreed. Watling, one of the few people to regularly stand up to Forrest, began yelling at his boss in the middle of the office: “Remind
me, Andrew, how many fucking railway lines have you built?”

By the middle of 2006, Forrest had become obsessed with building the project in record time, both to meet the sweet spot of Chinese iron ore demand and to avoid running out of money. He installed a big timepiece in the foyer of Fortescue’s Perth headquarters. In glowing red digits, the clock ticked down the days, hours, minutes
and seconds until the first batch of iron ore would leave Port Hedland. The target date had to be extended by a few months when Cyclone George tore though the Pilbara in March 2007, killing two workers and destroying Fortescue’s rail construction camp at a cost of $100 million.

The countdown clock in the office unnerved many employees, but it also drove many of them to work harder. Forrest
tried other tactics too. For the two years leading up to the maiden shipment in May 2008, he ordered in big plates of sandwiches at lunchtime so workers wouldn’t need to leave their desks. As the deadline loomed ever closer, he even began discussing with colleagues the need to build a crèche in the office to allow employees with children to be in the office for longer hours.

The stress of
working with Forrest took its toll on many people. Some left because they could not handle the relentless pressure and demands to put in long days. Forrest would send emails to executives in the middle of the night and expect a response. Most employees struggled along without ever taking a holiday, convinced they were part of something special. David Mendelawitz, who became Fortescue’s head of business
improvement, recalls he and his wife had a week’s holiday in Thailand after he’d been working for several years without a break. He could do virtually nothing but sleep for the whole week. But he believes the only way Fortescue could have been created was through the superhuman efforts led by Forrest. “Everyone told us we would never succeed; the guys that survived were the ones who said, ‘We
will make it succeed,’” he says.

Forrest’s goading of his staff paid off in the end. Within two years the whole project had been built – a shorter period than it might have taken to build a large house in Perth at the time. Forrest knew the deadline had to be met because Fortescue would have run out of money if had been unable to start selling iron ore. In the end, the total bill for the
project was $2.8 billion – higher than the earlier budget estimate but still good value, given the cost blowouts that were rife in the industry at the time.

By May 2008, Fortescue had a new port at Port Hedland with two berths catering for capesize vessels – the huge ships that are too large to pass through the Panama and Suez canals. And it had a brand new railway, consisting of 420,000
sleepers and 38,000 tonnes of steel, which ran right next to BHP’s tracks for most of its length. For the first time in forty years, a new company had built a rail line in the Pilbara. Naturally, it was done with record-breaking haste; the rail construction crew claimed an Australian record when it laid 3.3 kilometres of track in a single day in March 2008. Fortescue bought more than 800 ore cars
made in China, and a fleet of fifteen locomotives arrived from the United States. When the first iron ore at Cloudbreak was loaded on the trains, the project was ready to go. In total, there had been 10 million work hours, 4500 procurement orders, 13,000 engineering drawings, 330 contracts and 24,000 invoices issued to get the mining project started.

On 15 May, the clock in Fortescue’s Perth
office ticked over to zero. On a clear day in Port Hedland, Forrest, surrounded by his family and some of his closest friends, including fellow billionaires Kerry Stokes and James Packer, stood on the wharf as the carrier
Heng Shan
began loading the first 180,000 tonnes of iron ore to be shipped to China. For executives like Russell Scrimshaw, this was the moment that made all the turmoil of the
previous five years worthwhile. “Nothing short of a miracle,” he said of the moment he watched ore being loaded onto the ship. “There isn’t another example anywhere in the world of a resources company starting from absolutely nothing, one person with an idea, no money, no iron ore [and] building something so quickly.”

When the
Heng Shan
arrived in Shanghai after a ten-day journey from the
Pilbara, Forrest was visibly emotional, hugging strangers and toasting the event with glasses of Margaret River red wine. He acknowledged that he had been in the right place at the right time. “It’s the end of five years’ hard work which could really have only happened in these five years,” he said. “It needed a confluence of historical events which Fortescue was lucky enough to capture.”

Well before that first shipment, however, Forrest’s world had changed significantly. As investors began to recognise that the one-time cowboy had to be taken seriously, Twiggy became the poster boy of the Australian mining boom. Forrest’s self-belief and verve had driven the Fortescue share price from 10 cents in 2003 to more than $40 in mid 2007 – a year before a single tonne of iron ore had even
been shipped. Forrest became so popular that organisers at the Diggers and Dealers conference in 2007 had to lock the doors while he spoke, leaving hundreds of delegates stranded outside. The
New York Times
, the
Wall Street Journal
and the London
Times
each devoted feature articles to the buccaneering entrepreneur’s exploits, with headlines like “Comeback in the outback”, “Aussie jackeroo who
struck it rich” and “Iron upstart challenges the big boys”.

A few days after the first ship left Port Hedland,
BRW
magazine named Forrest as Australia’s richest person with a fortune of just under $10 billion – at that stage the highest in the history of the annual wealth survey. It was the first time in twenty years that Kerry or James Packer had not topped the list. Forrest’s wealth had
grown on the list from $340 million in 2005 to $810 million in 2006 and $3.89 billion in 2007 to peak at $9.41 billion. However, it was a fortune linked directly to the iron ore price. In 2008, the price of the mineral peaked at an incredible $US200 a tonne –seven times what it had been in 2003.

Andrew Forrest had made the fastest and most spectacular fortune in Australian history. And plenty
of others rode on his coat-tails. In 2003, a little-known Sydney investor, Kie Chie Wong, paid less than $1 million for a sizeable stake in Fortescue. Five years later, the Malaysian-born Wong had turned that investment into an astonishing $1.2 billion. His family company, Emichrome, had also backed Forrest at Anaconda and had thrown money at several other speculative mining stocks, but none
that scaled the heights of Fortescue. Wong, from the understated beachside suburb of Maroubra, made huge profits by cashing in some of his shares over the years, but to this day he remains a top-ten shareholder with about 3 per cent of the company’s shares.