Rio Tinto is considering its options after the Takeovers Panel ruled the mining giant can’t use its funding of a clean up of a controversial NT uranium mine to acquire a partially owned subsidiary.
Energy Resources of Australia (ERA) is in the midst of a $476 million entitlement offer to help pay for the $925 million rehabilitation of the Ranger mine surrounded by Kakadu National Park.
Rio Tinto, which owns 68.4 per cent of ERA, has agreed to subscribe to its full entitlement of shares and underwrite the offer, under which ERA shareholders can buy up to 6.13 shares at 15 cents apiece for every one they presently own.
Because the offer “is highly dilutive and requires shareholders to invest substantial additional capital to avoid dilution,” minority shareholders were unlikely to participate, the Takeover Panel ruled.
If no other shareholders took up their entitlement, Rio Tinto would obtain a 95.6 per cent stake in ERA, taking it past the 90 per cent threshold needed to compulsorily acquire the remaining shares and de-list the company.
“The terms of the underwriting agreement grant Rio Tinto … effective control over the management of ERA and dealings with a major asset of ERA over the medium to long term, inhibiting the acquisition of control over ERA taking place in an efficient, competitive and informed market,” the Takeover Panel wrote.
Insufficient measures were taken to ensure that a committee considering ERA’s funding options was independent of Rio Tinto and free of conflicts of interest, the panel wrote.
Richard Magides-owned Zentree Investments, which owns a 15.94 stake in ERA, had complained to the Takeovers Panel about the entitlement offer and asked that it be cancelled.
However, the panel is allowing the entitlement offer to proceed, but postponed its closing date by 20 days, and said that Rio Tinto could not launch a compulsory acquisition within six month of acquiring a 90 per cent interest in ERA.
Rio Tinto group executive Bold Baatar said the company would consider the panel’s judgment before determining next steps.
“We will now consider our options in light of the Panel’s orders so that ERA can fulfil its important rehabilitation obligations and commitments to the communities in which it operates and relevant authorities.”
One possible option would be for Rio Tinto to ask the Takeover Panel to review its decision.
ERA meanwhile said it didn’t intend to do that, given that the entitlement offer was proceeding, but added it “rejects any suggestion that potential conflicts of interest have not been sufficiently managed at any time during the process of developing a funding solution”.
ERA said the entitlement offer would now close on January 20.
The Ranger mine is completely surrounded by Kakadu National Park on the traditional land of the Mirrar people, who in 2015 declined to give ERA an extension to mining at the site past 2021.
By law ERA must rehabilitate the site by January 2026.
ERA’s other key asset is the Jabiluka uranium orebody, which the company describes as of global significance, but the Mirrar are also fiercely opposed to its development.
At 1305 AEDT, Rio Tinto shares were up three cents to $99.13.
ERA shares were flat at 15.5 cents.
AAP
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