Rio Tinto has flexed its muscle at ERA, calling for the resignation of independent chairman Peter Mansell
Rio Tinto secures the resignation of ERA chairman Peter Mansell after losing confidence in the business veteran over a Northern Territory uranium mine dispute.
Rio Tinto’s standoff with the independent directors of former uranium miner ERA looks set to continue after a dispute over the company’s future boiled over, despite their promise to resign.
ERA chairman Peter Mansell said he would quit the company’s board on Monday, along with two other independent directors – former Newmont Australia boss Paul Dowd, and Shane Charles – but not until a resolution is found to a stand-off over a funding package needed to pay for the rehabilitation of the Ranger uranium mine.
On Monday ERA hit back at Rio’s claims the dispute centres on an argument about whether it still hopes to eventually develop the controversial Jabiluka uranium mine, which sits near its mothballed Ranger operations, saying it has consistently said it intends to stick by a commitment that Jabiluka would only be developed with the support of traditional owners.
Rio owns 86.6 per cent of ERA shares, and called for Mr Mansell’s resignation amid a dispute over ERA’s future. Over the last two months Rio has been involved in a pitched battle with its independent directors over the terms of a capital raising needed to cover a major blowout in ERA’s rehabilitation liabilities at the Ranger uranium mine in the Northern Territory.
At the centre of the dispute, according to comments made by Rio’s chief executive Australia Kellie Parker last week, is an argument over whether ERA should permanently abandon any plan to mine the nearby Jabiluka deposit.
ERA confirmed last week it would stick by an agreement the deposit will not be mined without the permission of traditional owners, but Jabiluka still carries a book value within ERA’s accounts and an independent expert report endorsed by ERA’s independent directors also assigns a significant value to the deposit.
ERA and Rio have been arguing over the price of a $300m capital raising needed to fund a significant shortfall in the funds available for Ranger’s rehabilitation, and the independent expert report was commissioned to put a value on ERA shares.
But the report also revealed the company was planning to seek an extension of its mineral lease covering Jabiluka ahead of its 2024 expiry date, sparking a fresh concerns the controversial mine remains on ERA’s development horizon.
Jabiluka sits near ERA’s Ranger operations, and all sit within the World Heritage listed Kakadu National Park. Its development has always been opposed by the Mirarr traditional owners of the region, and opposition to Jabiluka’s construction sparked protests through the 1990s, culminating in an 8 month blockade of the site in 1998.
ERA conceded in 2005, signing a care and maintenance agreement with the Mirarr people that promised Jabiluka would never be developed without the consent of traditional owners.
The company rejected suggestions its independent expert report indicated it was seeking the development of Jabiluka, saying a comment in the report that it could “take at least seven to eight years before the Jabiluka mine is developed, subject to traditional owners approval” was merely aimed at informing shareholders of the minimum possible development time frame for valuation assessment purposes.
“It was not a statement of intention of ERA and it would be wrong to attribute the independent expert’s views on potential development timelines as a statement of intention of ERA,” the company said.
ERA said the dispute with Rio was about the price the $300m raising would be set at, with Rio offering to pay only 2c a share for its contribution to the equity issue. The Grant Thornton independent expert review put a 15.9c to 24.3c on ERA shares – implying the minority shareholdings are worth $80.2m to $122.6m – but that figure also included a valuation on Jabiluka.
ERA said its three independent board members told Rio last week they intended to resign over the dispute, well ahead of Rio’s Monday public call for the resignation of Mr Mansell.
Rio chief executive Australia Kellie Parker said on Monday the company no longer had confidence its approach to rehabilitating Ranger was aligned with the views of ERA’s independent board committee (IBC), which includes Mr Mansell, former Newmont Australia boss Paul Dowd, and Shane Charles.
“Our utmost priority and commitment is to the rehabilitation of the Ranger Project Area in a way that is consistent with the wishes of the Mirarr People. However, given our recent dealings with the IBC and last week’s release of the Grant Thornton valuation report, we do not believe that can be achieved without renewal within ERA’s board,” she said.
““We thank Peter Mansell for his contribution to ERA over many years and acknowledge his efforts to find a funding solution. However, there remains a strong difference of opinion between Rio Tinto and the IBC on the terms of rehabilitation funding, with the IBC’s view that successful rehabilitation could underpin potential future growth opportunities, despite the Mirarr People’s long-held opposition to further uranium mining on their country.”
But ERA said its IBC had already told Rio it had no plans to use cash raised from the share issue for the development of new business opportunities, including Jabiluka.
“In its discussions with Rio Tinto, the IBC made it clear that the funds from the interim entitlement offer are being sought to fund the Ranger rehabilitation until the end of 2023, which will provide ERA time to complete its updated feasibility study and prepare a revised closure plan. The IBC has never suggested raising funds through the interim entitlement offer for any mining development,” the company said.
“Further, Rio Tinto was apprised of the fact that in sizing the interim entitlement offer, ERA’s cashflow forecast contemplates using for rehabilitation the $20 million provisionally designated (at the time of ERA’s 2019 entitlement offer) as expenditure for prospective development opportunities or otherwise as the ERA Board determined to be in the best interests of ERA.”
Rio’s move on Monday came after a backlash from minority shareholders against its previous comments on the need for ERA to abandon its hopes for Jabiluka, with Perth businessman Willy Packer, who holds about 8 per cent of ERA, calling on Rio to sell its stake in the company if it did not want to see Jabiluka developed.
ERA shares closed up 1c, or 4.9 per cent, at 22c.
