Chris Ellison revelations spark Mineral Resources investor crisis

Mining giant Mineral Resources is in crisis talks with investors after shock revelations around its governance and the conduct of its talisman founder and managing director Chris Ellison.

Iron ore stockpiles at Mineral Resources’ mine in Marandoo, Western Australia.

Mining giant Mineral Resources is in crisis talks with investors after shock revelations around its governance and the conduct of its talisman founder and managing director Chris Ellison.

More than $1.2bn was stripped from the value of MinRes on Monday in the wake of Mr Ellison’s weekend admission that he was once a tax cheat.

The stock fell almost 14 per cent to $39.55 amid speculation MinRes could face a class-action lawsuit and investigations by the corporate regulator over claims a tax evasion scheme that benefited Mr Ellison and a handful of others continued once the company listed on the ASX.

Although Mr Ellison said he had made reparations with the Australian Taxation Office around his personal affairs, he faces allegations an elaborate tax evasion scheme involving offshore companies affected MinRes shareholders in the late 2000s.

Former MinRes chairman Peter Wade has been dragged into the scandal, with reports he was involved in the scheme and kept quiet about it while on the company’s audit committee.

Mr Ellison, Mr Wade and other members of inaugural executive team at MinRes are alleged to have used shareholder funds in purchases of mining equipment by an offshore company before selling the equipment back to MinRes at a higher price.

The Australian Securities & Investments Commission declined to comment when asked if it had launched an investigation.

Mr Wade also declined to comment when contacted by The ­Australian.

The MinRes board, led by chairman James McClements, has hired a law firm to investigate admissions Mr Ellison made to the ATO about failures to report revenue transferred from businesses in Australia to companies registered in the British Virgin Islands.

MinRes refused to answer questions about whether its inquiry would look at any deals where funds were transferred to offshore companies linked to Mr Ellison after MinRes became a public company.

There are claims such deals may have cost shareholders $7m.

Mineral Resources managing director Chris Ellison.

In statement released on Sunday, Mr McClements referred to payments made by MinRes to offshore entities connected to Mr Ellison since the company’s 2006 listing.

He said the pre-listing sales were recognised as liabilities in the company’s financial statements at the time.

Barrenjoey analyst Glyn Lawcock said investors would be trying to gauge how exposed MinRes and Mr Ellison were to more fallout from events that occurred more than 14 years ago and before MinRes became one of the nation’s biggest mining services providers and a major producer of lithium and iron ore.

“The market understands that an investment in MinRes is an investment in Chris Ellison,” he said.

“He is the talisman for the company and sets the strategy.”

Mr Ellison was on leave last week ahead of the governance storm that has descended on the company.

A fund manager with MinRes shares said it was too soon to know the full extent of the controversy and the potential impact on ­MinRes.

“If the (offshore) structure was set up before the company became public and even if it dragged on for a few years after listing, I think it is a Chris issue.

“He came clean and paid up the tax so I’m not sure that there’s anything more to be done,” he said, speaking on the condition of anonymity.

“If there’s additional information that means shareholders were impacted, that’s a different story.”

Former MinRes chairman Peter Wade.

Mr Wade was a key figure involved in three private entities that were joined together to form MinRes, and the company’s inaugural managing director.

He served as both executive and non-executive chairman from 2008 until 2022.

Mr McClements, who replaced Mr Wade as chairman, said on Sunday that Mr Ellison regretted his “errors of judgment” and still had the full confidence of the board.

In regard to his personal tax matters, Mr Ellison asked his lawyers to strike a deal with the ATO whereby he offered to pay back any taxes he owed on top of a multimillion dollar fine.

The approach was made years after the offshore transactions and came on the condition that the ATO did not make the ­approach or any related investigation known to the police or ASIC.

“More than 20 years ago, and prior to MinRes’ listing, we also operated entities overseas for acquiring mining equipment and parts to import into Australia and on-sell. Some equipment, prior to MinRes’ listing, was sold to our then-privately owned Australian businesses,” Mr Ellison said on Sunday. Regrettably, revenue generated by the overseas entities that we were beneficiaries of was not disclosed to the ATO at that time.

“This was a poor decision and a serious lapse of judgment,” Mr Ellison added.

“I have since voluntarily disclosed these matters to the ATO in full.

“All outstanding tax, penalties and interest that should otherwise have been paid by me has been fully repaid, and the matter has been settled with the ATO.

“These circumstances have also been disclosed to the MinRes board.”

The Australian’s DataRoom reported on Monday that Mineral Resources could be forced to raise up to $2bn of equity should its share price continue to fall and banks retreat from the miner, following revelations about its billionaire founder.

Mineral Resources has been looking at ways to strengthen its balance sheet to fund projects, including its Onslow iron ore ­project.

It is also weighing up a sale of Perth Basin assets, which sources say may reap $500m to $700m for the group.

Gina Rinehart’s company Hancock or Beach Energy with Mitsui are considered the most likely buyers.

Originally published as Chris Ellison revelations spark Mineral Resources investor crisis