Luck runs out for talisman Mineral Resources boss Chris Ellison
Mineral Resources founder Chris Ellison had an uncompromising style that has delivered billions of dollars in profits, but a late twist has muddied his reputation.
Mineral Resources boss Chris Ellison declared it was the “shittiest time” to run a business. That was at the end of August. If a smelly mess was piling up then as MinRes started sacking workers, now Ellison’s up to his neck in it.
Ellison, known for the odd expletive-riddled rant against analysts, is fighting for survival after public revelations about his role in an elaborate tax evasion scheme and a board-ordered investigation into his conduct that started back in 2022. The MinRes board found out the company’s talisman leader had reached a settlement with the taxman only through a whistleblower. The board now suspects emails related to the tax scandal were deleted as part of an attempted cover-up.
The company’s co-founder also stands accused of involvement in rental rorts on commercial properties leased to MinRes (he has now put those properties on the market), and of co-opting workers to help with his prized fishing boat, his private properties and personal business affairs.
One of the big problems for Ellison is that he crossed the line between his personal business affairs and those of MinRes far too often and, in the words of the board, at times failed to act with integrity.
Ellison made his fortune by getting his hands dirty after arriving in Australia from New Zealand in 1977. He attended Otago Boys’ High School but left aged 15, eventually ending up in the Pilbara where he worked as a labourer. The self-made billionaire survived on the smell of an oily rag in his early days in various businesses built in mining services.
In a mea culpa issued on Monday, Ellison said he regretted mistakes made as he tried to keep private events that had caused him “great personal embarrassment”.
The tax evasion scheme had its roots in the 2000s and involved Ellison and other founding executives buying and selling mining machinery through companies registered in the British Virgin Islands.
They then used credit cards to spend their profits without disclosing the income.
The board-ordered investigation by Herbert Smith Freehills continues to look at other matters involving Ellison and related parties. But that didn’t prevent chairman James McClements endorsing Ellison spending the next 12-18 months in charge as part of a leadership succession plan.
McClements, on the board since 2015, intends to exit the board sometime in the next 12 months and leave a new chair to appoint Ellison’s successor.
Big investors such as Rafi Lamm’s L1 Capital want Ellison to stay even in the face of the growing storm over governance standards at MinRes and compelling evidence that he used his position as managing director for personal financial again without adequate disclosure of related party transactions.
Some investors want Ellison on deck until the company’s Onslow Iron project is bedded down and suspect his longstanding friendship with Gina Rinehart and trust between them played a part in last week’s $1.1bn onshore gas deal.
Rinehart welcomed the chance to work alongside “her friend” Ellison in commentary on the acquisition by her private company, Hancock Prospecting, of MinRes assets in the Perth Basin and appears to have his back. Hancock and MinRes already have mutual interests in iron ore, lithium and port infrastructure, and Hancock held a near 3 per cent stake in MinRes as far back as 2010.
Based on the investigation into Ellison’s actions, the MinRes board concluded financial benefits flowed through to his daughter, Kristy Lee Craker, through her ownership of a shipping agency involved in iron ore exports.
If that seems incestuous in a business sense, so does much of the MinRes history.
One insider said Ellison had a genuine desire to make sure his family and the families of employees benefited from the success of the mining services provider turned lithium producer, iron ore miner and onshore gas player.
On the “keeping it in the family” philosophy, Ellison has made no apologies, and the company previously defended the business link to his daughter.
“In MinRes, we call them ‘next gens’, so I’ve got over 460 children of parents that work for MinRes,” he said recently.
“If you’ve been here two or three years, you’re guaranteed, if your kid wants to be an apprentice, you’re guaranteed an apprenticeship.”
Ellison, his mother-in-law and other associates were involved in an extraordinary initial public offering for lithium hopeful Kali Metals that opened and closed in less than 20 minutes and was vastly oversubscribed.
MinRes piled into the stock soon after the IPO. Asked in January why Ellison had taken a big stake in the IPO through his private company, MinRes said it had been rebuffed when it approached Kali before the IPO and had to wait until the stock started trading on the ASX.
Another lithium deal that raised eyebrows came back in 2016 when MinRes purchased the Wodgina project from Global Advanced Metals, which is owned by McClements’ private equity firm, Resource Capital Funds.
MinRes never disclosed the sale price, which it considered immaterial. It then sold a half share in Wodgina to New York-listed Albemarle for about $1.56bn in 2018. Albemarle boss Kent Masters later described Ellison as a “colourful character” but their partnership has endured several resets initiated by MinRes.
Ellison fans argue he deserves credit for turning MinRes into a major force in mining with about 7000 workers on its books despite recent job losses across its head office, lithium division and from the wind up of its Yilgarn iron ore operations. He also has proved a shrewd political player despite a few rough edges and sailing close to the wind on some deals.
When MinRes acquired Cleveland-based Cliffs’ loss-making operations in the Yilgarn in March 2018, it negotiated a free kick on royalty payments that was signed off on by then WA premier Mark McGowan and his Labor government.
McGowan is now on the books as an adviser to MinRes and was one of the guests when Ellison hosted Anthony Albanese for a dinner at MinRes headquarters in August. Other guests included incumbent WA Premier Roger Cook and federal Resources Minister Madeleine King. The gathering came about because Ellison forked out about $160,000 in MinRes funds for the privilege of a private diner with the Prime Minister at a charity auction.
On Monday the MinRes board said it wanted Ellison out, but not in a hurry. It is walking a tightrope between keeping big investors happy and taking more immediate action over Ellison’s blatant conflicts of interest and disclosure failures.
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