Minority shareholder seeks to delay equity raise that could see Rio Tinto acquire ERA
Make us a preferred source
Make us a preferred source on Google
The news: Zentree Investments, a small Singaporean family office, has filed an application with the Australian Government Takeovers Panel over concerns regarding a future equity raise that could see Rio Tinto acquiring Energy Resources of Australia (ERA).
The numbers: Rio Tinto is ERA's largest shareholder with 86.33% of shares. Zentree said the equity raise would increase Rio's voting power beyond the compulsory acquisition threshold of 90%.
ERA's second largest shareholder is Packer & Co. with 9.32%.
The equity raise relates to the rehabilitation of the Ranger mining area which Rio agreed to directly manage in April after costs blew out. ERA previously outlined spending of $1.2 billion on rehabilitation activities but now expects costs to exceed $2.4 billion.
The context: In March, ERA announced that it expected further funding to be required in the second half of 2024 for the rehabilitation activities through a material equity raise.
While the equity raise has not been announced yet, the Takeovers Panel received an application from Zentree that claimed, among other issues, that minority shareholders did not have a reasonable and equal opportunity to participate in the substantial benefits that would accrue to Rio.
It also claimed that Rio "has been executing a strategy for almost 10 years to achieve 100% ownership of ERA without having paid a premium for control to the minority shareholders".
The Takeover Panel said Zentree sought "interim orders that ERA delay the equity raise and be prevented for issuing any new shares to any person no earlier than seven days after on which the application is determined".
The application also requests that ERA initiate the sale process for the Jabiluka mining lease. The Jabiluka uranium deposits, once set for mining development, have been under rehabilitation since 2003 without any uranium extraction.
The deposits, along with Rio Tinto’s fully extracted nearby Ranger mines, are significant contributors to Australia’s global lead in uranium reserves. In March, ERA applied to renew its lease on the deposit which is surrounded by Kakadu National Park — a move opposed by indigenous leaders. ERA claimed that extending the lease was "the best way to protect Jabiluka's cultural heritage" as it had no development plans for the deposit.
According to reports by the Australian Financial Review, Zentree previously participated in an equity raising to block Rio Tinto’s acquisition of ERA in 2020. Founder Richard Magides alleged Rio Tinto was undertaking a secret takeover of ERA. However, this was at a time when Zentree owned almost 16% ERA but now its ownership is in the minority.
The sources: ASX announcement, AFR, ASX announcement, ASX announcement
