Rio Tinto has welcomed the news from Energy Resources of Australia (ERA) that it will renew its independent board committee as the two companies move to lower the temperature of a dispute about the cost and method of rehabilitating the Ranger uranium mine and its surrounds in the Northern Territory.
Rio was coy in its statement, describing the ERA (86% owned) announcement as introducing “new perspectives to address the material cost and schedule overruns on the critical Ranger rehabilitation project in Australia’s Northern Territory.”
The board changes were revealed by ERA at the bottom of a statement to the ASX announcing a revamped $100 million credit facility provided by Rio, that:
“Following the agreement of the terms of the Revised Credit Facility, which provides a clear pathway to an interim funding solution, ERA’s Chairman, Peter Mansell, and independent non- executive directors, Paul Dowd and Shane Charles (who comprise the IBC), have resigned from the board of ERA with immediate effect.”
Rio Tinto CEO Australia Kellie Parker said in her statement “We thank Peter Mansell, Paul Dowd and Shane Charles for their contribution to ERA and wish them well for the future.
“We are committed to working with ERA to facilitate this board renewal process and urgently develop a workable plan to fund the increased rehabilitation costs.
“We restate our belief that the successful rehabilitation of the Ranger Project Area, which is of critical importance to the Mirarr People, Rio Tinto and ERA, can be achieved in a way that is consistent with the Mirarr People’s wishes. This remains our utmost priority and commitment.”
“Rio Tinto has finalised work with ERA to amend an existing A$100 million credit facility to assist ERA with its management of immediate liquidity issues”
The ERA statement had more detail of that funding arrangement that make it clear the money is only to be used on the rehab work at Ranger and nothing else.
“Energy Resources of Australia Ltd has today agreed to enter into an amended $100 million loan agreement with Rio Tinto, under which loans of a cumulative value of up to $100 million can be made available to provide ERA with additional liquidity for the purpose of rehabilitating the Ranger Project Area.
“The Revised Credit Facility has a maturity date of 31 March 2023 unless additional funds are raised before that, or unless extended by Rio Tinto. The maturity date is subject to deferral for ~3 months if ERA is unable to repay the loan at that time.
“The Revised Credit Facility provides ERA with additional time to negotiate and implement a future funding solution and offers additional assurance to the Company’s stakeholders that rehabilitation of the Ranger Project Area will continue to be funded.”
The interest rate on the line of credit is now nil, after being previous based on the bank bill swap rate plus 9%, which could have pushed the real cost well over 12% and as high as 15%). That is a real concession by Rio and will save ERA more than $10 million a year at least.
In the ERA statement, the three departing directors made it clear they had a few points to make about events this week which blew up over an independent expert’s report prepared for the company on the rehab plan and claims there were suggestions that the nearby Jabiluka uranium deposit might be mined, despite the strong opposition of its owners, the Mirarr People.
That erupted into a series of claims about who said what and when and saw Rio call for the resignation of chairman, Peter Mansell, who refused to go.
The independent board committee set three requirements to be met and obviously feel settled they have and said so in Thursday’s statement “The IBC is satisfied that its three requirements have been met. Following the resignation of the independent directors, Justin Carey has been appointed as the Interim Chairman of the ERA board to replace Mr Mansell.
Obviously a truce has been reached – Rio has made sure its 86% owned subsidiary is back under control by advancing $100 million at no interest to ERA. It has used a similar tactic at the Turquoise Hill company in Canada where it is trying to take over the 49% of the company it doesn’t own and has advanced $US600 million to Turquoise to help its funding needs.
ERA shares closed at 20.5 cents; Rio shares rose 0.2% to $98.05.
