The board of mining giant Mineral Resources intends to detail how it will handle an alleged tax evasion scheme involving founder Chris Ellison, amid a share price plunge shaving $2.4 billion off the company’s value.
It has been just over one week since the board revealed it had engaged law firm Herbert Smith Freehills to conduct an external probe into the allegations before the Australian Financial Review thrust them into the spotlight.
In that time, the share price has dropped more than 25 per cent.
Mineral Resources boss Chris Ellison.
In a statement released on Monday morning, the board confirmed it would brief the market about the probe’s findings and how it intended to respond to the allegations by November 4.
It also told the market the probe had evolved to respond to “inconsistencies” that had emerged between the media reporting and the board’s prior understanding of the facts.
Despite Ellison being overseas on what is understood to have been pre-planned leave, the board stated he had been cooperating with the investigation into conduct the billionaire blamed on a “serious lapse of judgment”.
MinRes chair James McClements insisted the board understood the need to govern in the best interests of shareholders and would respond to the claims, which have now drawn the attention of the corporate regulator.
“The board’s response is driven by high governance principles and the best interests of MinRes shareholders, now and into the future,” he said.
“We are determined to ensure that this is the path for MinRes long into the future, and we understand our role as a board is to strike the appropriate balance of all factors, so this is delivered for our investors.
“At the same time, it remains focused on generating sustainable value for its shareholders.
“There has been significant board renewal in the past two years and the board today comprises directors who individually and collectively have an unswerving commitment to strong governance and are committed to continuous review and improvement.”
The Financial Review investigation alleged Ellison and four other MinRes executives made millions using offshore companies to peddle an equipment markup scheme.
The scheme, which allegedly involved using the entities to acquire mining equipment and parts to import and on-sell in Australia, was devised in 2003.
It allegedly continued operating three years after the $9 billion diversified mining services company’s initial public offering in 2006, with the payments listed as liabilities in financial statements at the time.
The revenue generated by the overseas entities benefiting was allegedly not disclosed to the Australian Taxation Office at the time.
According to the Financial Review, Ellison struck a deal with the tax office to repay the taxes he owed several years ago on the condition that it did not disclose the agreement to the corporate watchdog.
The reporting also contained allegations Ellison and a former director purchased heavily discounted mining equipment for a farm the pair owned in New Zealand.
On Friday, AustralianSuper revealed it had sold off shares in the iron ore miner as it continued to assess its longer-term position.
Mineral Resources has become one of the most valuable companies on the ASX since its inception in the 1990s, and ranks as the fifth-largest iron ore producer in the country.
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