12th Dec 2019 08:31
(Alliance News) - Anglo-Australian miner Rio Tinto PLC said Thursday it is aware the Australian regulators have deemed its takeover of majority-owned subsidiary Energy Resources of Australia Ltd "unacceptable".
In mid-November, Rio said it would take part in and underwrite a fundraise by investee Energy Resources of Australia. ERA, which is listed in Sydney, is looking to clean up and close the Ranger uranium project area in the Northern Territory of Australia.
Rio Tinto owns a 68% stake in ERA, but if the fundraise went ahead with no other shareholders participating, then Rio would end up with a 96% stake in ERA.
As a result, the Takeovers Panel of the Australian government decided Rio cannot compulsorily acquires shares in ERA as a consequence of the entitlement offer without shareholder approval.
The entitlement offer has been delayed 20 days, to allow ERA to further discuss the merits of the plan with the Takeover Panel.
ERA has been looking to raise AUD476 million, or USD323.4 million, to go towards the plan, but the firm has been unable to secure third-party underwriting support, so Rio Tinto will step in to "ensure ERA has the funds it needs".
Darwin-based ERA said in a statement Rio Tinto will be taking up its 68% entitlement "in full".
Bold Baatar, Rio Tinto's head of Energy & Minerals, said: "Rio Tinto agreed to fully subscribe to and underwrite an entitlement offer in the absence of any other commercially viable solution being available to ERA for the rehabilitation of the Ranger project area."
He continued: "We will now consider our options in light of the panel's orders so that ERA can fulfil its important rehabilitation obligations and commitments to the communities in which it operates and relevant authorities."
ERA has to end mining and processing at the Ranger project by January 2021, and completely clean-up the site within five years of that date. Ranger is situated within the Kakadu national park, some 260 kilometres south-east of Darwin, the capital of the Northern Territory.
In early February, ERA finalised its closure feasibility study for the Ranger project rehabilitation, which showed a "material" increase in expected rehabilitation costs. So, ERA needed extra funding to meet its rehabilitation obligations.
Shares in Rio Tinto were up 0.1% in London on Thursday morning at 4,324.00 pence each.
By Paul McGowan; [email protected]
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