Energy Resources of Australia has hit a roadblock in its efforts to raise about $300 million in interim funding to continue with planned rehabilitation works at the Ranger uranium mine in the Northern Territory.
It had planned to use proceeds from an Interim Entitlement Offer (IEO), together with ERA’s cash on hand, to fund the works for sufficient time to enable the company to complete a revised feasibility study for the project, to prepare a revised mine closure plan (with updated project cost estimate and schedule) and to determine the balance of any funding requirement to complete the rehabilitation.
ERA’s Independent Board Committee (IBC) had proposed, in its discussions with its significant shareholders, pricing the IEO at a 10-15 per cent discount to the prevailing share price.
However, following engagement with ERA’s biggest shareholder Rio Tinto and the next two largest shareholders, no pre-commitments to subscribe for entitlements in the IEO were forthcoming on the IBC proposed terms.
As a consequence, the IBC does not have sufficient confidence that proceeding with the IEO on the terms it had proposed will raise the necessary funds.
In declining to support the offer at the price proposed by the IBC, Rio Tinto has noted the lack of pre-commitment from minority shareholders.
It has further advised that it does not expect its investment in rehabilitation to generate financial returns.
As such Rio Tinto considers the offer price should reflect fair value which has regard to that expectation, the material cost over-runs and interim funding requirements. and the Mirarr People’s publicly stated position on the future development of Jabiluka.
The IBC has determined that it will delay the launch of the offer to enable it to urgently engage an independent valuation expert to determine the fair value of ERA shares.
The IBC notes Rio Tinto’s previous public statements to the effect that it is committed to working with ERA “to ensure the rehabilitation of the Ranger Project Area is successfully achieved to a standard that will establish an environment similar to the adjacent Kakadu National Park”.
As at June 30, 2022, ERA had $132 million of cash on hand (unaudited).
ERA said it was mindful that suspension of the project would likely have detrimental impacts to the overall cost and schedule for its completion.
