RBC says MinRes removal of Chris Ellison is 'positive'
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More news: Mineral Resources shares continued to fall but RBC Capital Markets analysts said the announcement that managing director Chris Ellison would step down was “positive”.
Shares in the company were down 8.37% to $37.21 by 11.35am AEDT. RBC has an ‘outperform’ rating on the stock with a price target of $64.
RBC viewed the steps taken as positive as it removed near-term uncertainty around leadership, provided an appropriate transition period for succession, and a new chair would likely add to ongoing strengthening of corporate governance.
What they said: “...We believe the key concern over the medium term will be centred around who will replace Chris Ellison,” RBC analysts said.
“Despite the recent governance issues, Chris Ellison still appears well regarded by the market, as the founder-led company is entrepreneurial, has lower bureaucracy, and clarity of vision.
“However, the business appears to be looking to strike a balance as it matures, with Chris Ellison taking a less active role a few years earlier than we would have expected.”
Mineral Resources shares tumble as Citi downgrades to 'sell'
More news: Shares in Mineral Resources have tumbled more than 7% to $37.71 after the embattled miner said Chris Ellison will step down as managing director within 12 to 18 months following an investigation into tax evasion and other allegations. It also announced James McClements will step down as chair before next year’s annual general meeting.
Analysts at Citi have responded by downgrading the stock to 'sell' and slashing their 12-month price target to $35 a share from $50 a share.
What they said: "While we appreciate there's financial penalties, strengthening corporate governance and a timeline for chair and MD transition, the slow pace of change will likely weigh on the stock, in our view. It's a tricky call, fundamentally the assets don't change with a new MD; and Onslow should be ramped to 35Mtpa next June," the analysts said in a note.
"That said Mineral Resources has JV [joint venture] partners to manage and 30% external contract volumes. We expect this will have negative ESG implications for many investors with concerns around any other matters not yet known and culture. An ASIC [Australian Securities and Investments Commission] probe is an additional headwind."
Mineral Resources' Chris Ellison to step down after transition and will pay fine
The news: Mineral Resources has announced Chris Ellison will face financial penalties and will step down as managing director as part of an orderly transition effected within the next 12 to 18 months, following its investigation into tax evasion allegations.
The numbers: The company said apart from stepping down following the transition period, Ellison will incur financial penalties of $8.8 million and forego remuneration of up to $9.6 million.
Mineral Resources said the penalties reflected the significance of corporate governance issues and reputational issues for the company.
It also announced James McClements will step down as chair before or at next year’s annual general meeting (AGM) after nearly 10 years in the role.
The context: Mineral Resources has been under fire for weeks after Ellison admitted to involvement in an alleged tax evasion scheme involving offshore companies, following media reports.
The company had last week announced an investigation by law firm Herbert Smith Freehills, and on Monday said the board had identified a range of issues and shortcomings. The conclusions included Ellison’s interest in offshore companies, non-disclosure of his private tax settlement to the company until November 2023, providing financial benefits to related parties and using company resources for personal benefit.
The company said while Ellison had co-operated with the investigation, he had not been as forthcoming with the board as he should have been, and had not acted with integrity at times. It said Ellison has apologised to the board.
The company has also withdrawn a resolution from its upcoming AGM for approving grant of securities to the managing director.
The sources: ASX announcement, ASX announcement
