Mining giant Rio Tinto has agreed to provide funding for the cleanup of its controversial Ranger uranium mine in the Northern Territory owned by its subsidiary, but in a way that would greatly increase its stake in the company.
The 38-year-old mine must close by January 2021 after its traditional Aboriginal owners rejected continued mining at the site in 2015, but Energy Resources of Australia doesn’t have the $799 million it is estimated it will cost to rehabilitate the site.
ERA only has $349 million total cash at bank as of June 30, plus another $76 million held by the federal government as part of a cleanup trust, bringing total cash resources to $425 million.
“Following extensive discussions regarding a number of potential funding options, Rio Tinto has advised ERA that is only willing to provide additional financial support to ERA via a renounceable entitlement offer undertaken by ERA,” ERA said in a statement on Thursday.
In that event, Rio Tinto would subscribe for its 68.4 per cent entitlement of new shares – the same percentage of ERA that it owns.
It would underwrite the balance of the entitlement offer on terms to be agreed, ERA said.
“ERA is considering the size, structure and terms of any potential renounceable entitlement offer, having regard to the interests of ERA as a whole,” ERA said.
“In parallel, ERA continues to investigate whether there are other potential funding sources,” the company said.
“ERA will provide a further update in due course.”
The Ranger mine 230km east of Darwin is surrounded by Kakadu National Park and has been the subject of protests for decades.
It has produced 128,000 tonnes of uranium oxide for nuclear power plans around the southern hemisphere since opening in 1981, as well as a billion dollars in dividends, another billion in tax and half a billion in royalties to Aboriginal interests and the government.
But its traditional owners, the Mirarr people, say the federal government imposed a toxic industry on them against their will, citing more than 200 spills and licence violations at the mine since 1979.
Seperately, ERA said it made $49.2 million in profit in the six months to June 30, up 150 per cent from a year ago, on profit of $170 million on uranium sales and $190 million on other activities.
At 1236 AEST, ERA shares were unchanged at 23.5 cents, while Rio Tinto shares were down $3.88, or 3.8 per cent, to $96.63, in keeping with a general decline in the mining shares on Thursday.