Antinuclear

Australian news, and some related international items

Rio Tinto moves to own Ranger remediation

Rio Tinto moves to own Ranger remediation, Matthew Stevens, Jul 26, 2019

https://www.afr.com/companies/mining/rio-tinto-moves-to-own-ranger-remediation-20190725-p52ape

In pushing Energy Resources Australia towards a potentially controversial capital raising Rio Tinto has moved to take greater ownership of what is arguably the most important mine retirement and clean-up in Australian resources history.

The task ahead is the required $830 million remediation of the Ranger uranium mine, which sits in a necessarily excised pocket of the United Nations World Heritage-listed Kakadu National Park.

Ranger has been operated by Energy Resources Australia through its often controversial 40-year life. Through that time ERA has been majority owned by Rio Tinto or its Australian forebear, CRA. Currently Rio owns 68.4 per cent of ERA.

But a plan to fill the $400 million or so gap between what Ranger’s remediation is expected to cost and the cash that ERA has at hand to pay for the big clean-up could quite easily see Rio creep to a position that would see the mine operator fully absorbed by the mother ship.

ERA revealed extended discussion with Rio Tinto over how the funding gap would be filled has ended with its Anglo-Australia overseer insisting the only path was for Ranger’s operator to make a renounceable rights issue.

Rio Tinto has committed to take up its full entitlement and to underwrite the balance of any issuance if alternatives are not available.

The erstwhile uranium miner told its minority owners that it is “considering the size, structure and terms” of any potential rights issue “having regard to the interests of ERA as a whole”.

While that is an appropriate expression of independence, the most unlikely outcome here would be an ERA board populated by Rio Tinto appointees will end up doing anything that does not concur with the parent’s view of the company’s future.

The minority question

The most likely question ahead, then, for minority shareholders is going to be whether or not they double-down on a failed punt and back the rights issue needed to sustain the long, costly wind-up of their business?

Whatever the size, structure and terms of the raising Rio Tinto wants ERA to make, it will be material to the minority owners. ERA’s current market capitalisation is $130 million. So tapping the market for even half the shortfall could prove definitively dilutive for those unprepared to throw funds at a business destined to disappear.

In most circumstances this course might be cause to wonder at whether or not this pathway might represent a level of minority shareholder oppression. Rio Tinto’s pitch though is the exception to the rule.

ERA stopped being a miner five years ago and hopes its future might be extended were dashed a few years later when Rio Tinto found itself unable to support the Ranger 3 underground expansion, a conclusion we revealed first in April 2015.

Presently ERA’s only recourse to income is through processing uranium from stockpiled ore. That production will end in 2021 and ERA has a legal obligation to safely close the operation by 2026. The cost of remediation will endure at least half a decade beyond that and so too will the risk to reputation and social licence of any and all shortcomings of that effort.

Quite sensibly, Rio Tinto assesses it fully owns the risk of any failure or future non-compliance. It is regularly reminded of that inescapable reality by the anti-uranium activists, by the increasingly power ESG lobby and by governments state and federal.

RELATED: Rio Tinto worried about ERA’s Ranger uranium mine

The funding proposal sketched out on Thursday announces those warnings were unnecessary. Rio Tinto really does want to own Ranger’s remediation.

July 27, 2019 - Posted by | environment, Northern Territory, uranium

No comments yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: