Rio Tinto under fire from ERA minority shareholders over plans for huge uranium deposit
Rio Tinto has been accused of treading on the rights of minority shareholders in Energy Resources of Australia in a bid for control of one of the world’s biggest uranium deposits.
Rio Tinto has been accused of treading on the rights of minority shareholders in its majority-held Energy Resources of Australia (ERA) over the future of one of the world’s biggest uranium deposits.
Zentree Investments, which owns about 3 per cent of ERA, is seeking a review before the Takeover Panel alleging “unacceptable conduct” in relation to a proposed capital raising by ERA, which holds the title to the huge Jabiluka uranium deposit in the Northern Territory.
Rio Tinto has built its stake in ERA to more than 86 per cent through a series of rights issues over the past few years, which small shareholders claim has diluted their interests.
Rio would need 90 per cent to force a compulsory acquisition of the remaining shares. Zentree is the second-biggest remaining shareholder in ERA behind Packer Investments, which holds about 9 per cent. There are about 10,000 other smaller shareholders in the company.
ERA is currently in the middle of an expensive rehabilitation of its Ranger uranium mine, which is adjacent to Jabiluka and surrounded by the Kakadu National Park. Ranger finished production in 2021. Jabiluka reportedly contains enough uranium to provide energy equivalent to 5 per cent of Saudi Arabia’s total oil reserves, making it a huge prize given the doubling in the price of the mineral in the last year.
Unlike Ranger, which was a large low-grade open cut mine, Jabiluka is a high-grade proposed underground mine valued at up to $5bn and containing 10 per cent of the world’s uranium.
Exploitation of the reserve still needs approval from the traditional owners, who have so far opposed any mining. ERA said it has no current plans to start production at Jabiluka.
Smaller shareholders are believed to be concerned about the lack of consultation from Rio over plans for ERA, which operates with an independent board but is effectively run as a subsidiary of the mining giant. ERA appointed Rio Tinto in April to manage the Ranger rehabilitation project under a new management services agreement.
In 2022, Rio fought with ERA’s independent directors around the future of Jabiluka, and their insistence that the uranium deposit could be developed, despite opposition from the Mirarr traditional owners of the region.
ERA chairman Rick Dennis told the company’s annual general meeting in April that the successful completion of a $369m capital raising in May 2023 ensured sufficient funds for planned rehabilitation activities through to the third quarter of 2024.
In early March, the company announced the appointment of financial and legal advisers to assist with a potential equity raise in the near future. Rio Tinto declined to comment.
It’s not the first time Zentree has complained to the Takeovers Panel about Rio Tinto’s control over Era. In 2019 it alleged minority shareholders were not being given “reasonable or equal opportunity to participate in benefits flowing to Rio Tinto” in a 6.13 for 1 pro rata renounceable entitlement offer to raise approximately $476m.
Zentree had said at the time there was inadequate disclosure as to the need, size and urgency of the entitlement offer, and there “is no serious dispersion expectation for the entitlements or the new shares”.
ERA shares dropped 4.2 per cent to 4.6 cents on Thursday.
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