PERTH (miningweekly.com) – The independent board committee (IBC) of ASX-listed Energy Resources of Australia (ERA) will need to go back to the drawing board in their quest to raise funding to finance rehabilitation work at the Ranger uranium project, in the Northern Territory.
ERA told shareholders on Thursday that the company had been engaging with its three largest shareholders, including Rio Tinto, which holds an 86.3% interest in the company, in relation to a non-underwritten, renounceable entitlement offer to raise A$300-million in interim funding for rehabilitation work on an optimised basis, until the end of 2023.
The IBC had proposed pricing the interim entitlement offer at a between 10% and 15% discount to ERA’s prevailing share price, taking into regard the Takeovers Panel guidance and the need to mitigate the potential control effects given the proximity of Rio’s shareholding to the 90% general compulsory acquisition threshold.
The IBC also had regard to the fact that Rio could become entitled to exercise general compulsory acquisition rights under the Corporations Act, and that the offer price under the interim entitlement offer could have bearing on the compulsory acquisition.
However, ERA on Thursday said that the IBC’s proposed terms for the interim capital raise had failed to entice the company’s largest three shareholders, leaving the IBC without confidence that the necessary funds could be raised.
Rio reportedly argued that its further investment into ERA was unlikely to generate financial returns, given that funding would be used for rehabilitation work, and that the offer price of any interim raising should reflect fair value to that expectation. Rio argued that the interim raising price should also reflect the material cost overruns expected in the rehabilitation efforts, and the Mirarr People’s publicly stated position on the future development of Jabiluka.
Rio in its interim results this week said that it was "disappointed" to learn of the material cost and schedule overruns at the Ranger rehabilitation project, but that the company remained "committed to ensuring the rehabilitation project is completed to a standard that will establish an environment similar to the adjacent Kakadu National Park".
ERA took a swipe at this statement, with the IBC noting that Rio subscribing for its full pro rata share of its entitlements in the interim entitlement offer, where the price is set by the IBC by reference to the fair value of ERA determined by the independent expert valuer, would be more likely and consistent with Rio’s stated commitment to the completion of the Ranger rehabilitation project.
“Rio’s full participation in the Interim Entitlement Offer would ensure that funding required for the rehabilitation of the Ranger Project Area until December 2023 is successfully raised,” ERA said in a statement.
ERA further noted that having to suspend or slow the progress of the Ranger rehabilitation project would likely have detrimental impacts on the overall cost and schedule for the completion of the Ranger rehabilitation project.
ERA earlier this year flagged that an independent review of the Ranger rehabilitation had estimated a cost of between A$1.6-billion and A$2.2-billion for the project, compared with the 2019 cost estimates of A$973-million.
Furthermore, the review found that completion of the Ranger project rehabilitation work would be between the fourth quarter of 2027 and the fourth quarter of 2028.
As of the end of June 2022, ERA had A$132-million of cash on hand.