Rio Tinto has offered to take up $760m in ERA shares to fund the Ranger mine area clean-up
The mining giant will effectively take over Energy Resources of Australia, if it takes up most of the $880m capital raise to fund rehabilitation works at the Ranger uranium mine.
Rio Tinto is has offered to take up most of an emergency capital raise by Energy Resources of Australia, which the latter says is needed to remain solvent, however dissident shareholder Packer & Co says any decision should be postponed beyond a crucial court hearing in October.
ERA last week said it needed to raise at least $210m from existing and third party investors to fund ongoing rehabilitation works at the shuttered Ranger uranium mine in the Northern Territory, which are expected to cost more than $2.4bn in the next few years.
The company said if it did not raise the money, it risked falling below its minimum cash reserve of $50m.
ERA on Wednesday told the ASX that Rio Tinto, which owns about 86 per cent of its shares, had come back saying the “only terms” it would accept were for an $880m capital raise at a steeply discounted 0.2c per share.
Rio, ERA said, would take up $760m of the offer, which if minority shareholders Zentree Investments and Packer & Co did not take up their allocations, would push it past the 90 per cent ownership threshold, allowing Rio to compulsorily acquire the shares it did not own.
But Packer & Co’s Willy Packer said the capital raise should be delayed beyond a court hearing on October 28, where ERA will argue against the July decision by the NT government not to renew its separate Jabiluka mineral lease, which the company had received a non-binding $550m offer for from uranium producer Boss Energy.
That deal fell through when the NT government’s decision was made public, leaving ERA with effectively one asset, which was the large Ranger liability.
ERA will argue it was denied procedural fairness regarding the Jabiluka decision, and has been granted a stay of the decision in the Federal Court ahead of a final hearing on October 28.
Mr Packer said any capital raise should be delayed until the court hands down a decision on the Jabiluka matter.
He also said that given there had been a change of government in the NT, with the Country Liberal Party taking power last weekend, there was scope for the July decision to be rescinded.
Mr Packer said a delay of a matter of months to allow the issue of the future of Jabiluka to be settled would be the appropriate path, and argued Rio was trying to “crucify’’ minority shareholders in a bid to get its hands on ERA’s tax losses.
“This is the third time in four years that UK-based Rio Tinto have pushed ERA into heavily discounted capital raisings in an attempt to seize control of ERA through compulsory acquisition,’’ Mr Packer said.
“They are doing this once again, this time, two months before a court case that will decide whether ERA retains one of the world’s most valuable deposits of uranium, vital to the world’s decarbonisation plans.
“This issue is being conducted despite ERA having enough cash on hand to see out this court case, the outcome of which will enable the 9000 shareholders to decide whether to support the company into the future, knowing whether ERA has any assets, or only liabilities, the extent of which are ever changing.’’
Rio Tinto declined to comment on Wednesday. Chief executive Jakob Stausholm has preciously said Rio had a “moral obligation’’ to pay its fair share for the Ranger clean-up.
Also on Wednesday, the Takeovers Panel announced it had declined to conduct proceedings in relation to a complaint brought by Zentree against Rio for an earlier capital raise.
ERA said on Wednesday its independent board committee (IBC) had decided to go ahead with the offer, in a bid to ensure the company remained solvent.
“Having regard to the likely timing of settlement of the entitlement offer (indicatively October 2024) and the fact that the final hearing for the court proceedings regarding Jabiluka is not scheduled to commence until late October 2024 (noting that it is likely that a judgment would not be handed down until some time later), the IBC determined that it was necessary to proceed with an entitlement offer to ensure ERA remained solvent and was able to meet its
ongoing obligations,’’ the company said.
ERA said Rio’s voting power could increase to as much as 99.2 per cent following the entitlement offer.
“As Rio Tinto’s percentage holding in ERA may increase as a result of the entitlement offer,
Rio Tinto has provided an intentions statement that will be included in the … offer
documentation in relation to ERA’s business in accordance with Takeovers Panel guidance,’’ ERA said.
If Rio moves to a shareholding of more than 90 per cent following the offer, it would have the option to compulsorily acquire all shares in the company.
“Packer & Co and Zentree Investments’ aggregate percentage holding in ERA would have to reduce in order for Rio Tinto to own 90 per cent or more of the shares in ERA,’’ ERA said.
Mr Packer indicated he would not be taking up his entitlement in any such offer.
ERA shares crashed 54.9 per cent on the news to 0.7c.
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