Ranger valuation report prompts ERA board changes

04 October 2022

Energy Resources of Australia (ERA) has announced that its chairman and two independent non-executive directors are to step down. The announcement came after majority owner Rio Tinto questioned the content of a newly released valuation report to address material cost and schedule overruns on the rehabilitation of the Ranger project.

The Ranger mine and processing plant, pictured here in its operating phase, is now being rehabilitated (Image: ERA)

Rio Tinto, which owns just over 86% of ERA's shares, requested on 2 October that ERA Chairman Peter Mansell resign "to allow for board renewal and introduce new perspectives to address the material cost and schedule overruns" on the rehabilitation project in Australia's Northern Territory. This followed the publication by ERA on 26 September of the valuation report, which Rio Tinto said failed to "give due weight" to the position of the Mirarr People, the traditional owners of the land in Kakadu National Park where the former mine is situated.

The independent valuation report was prepared by accounting and consulting firm Grant Thornton. In addition to its authority to mine at Ranger - which expired in 2021 - ERA holds a mineral lease over the adjacent Jabiluka site which is due to expire in 2024. Jabiluka is a site of international cultural heritage significance, containing extensive rock art galleries of World Heritage significance as well as sacred sites and the archaeological site of the oldest known human occupation in Australia.

The Mirarr People - via the Gundjeihmi Aboriginal Corporation - said the report wrongly assumes that the Jabiluka mineral lease will be renewed and that the traditional owners would be willing to consider mining there. Gundjeihmi Aboriginal Corporation CEO Justin O'Brien said the report had "re-characterised our co-operation with rehabilitation activities as some kind of support for mining in general."

"Following announcement of the cost and schedule overruns in February 2022, Rio Tinto has sought to work constructively with ERA's Independent Board Committee (IBC) to find a funding solution to meet its rehabilitation obligations. This included engaging for several months on an interim entitlement offer that was deferred by the IBC in July 2022 when its proposed terms failed to obtain major shareholder support," Rio Tinto said.

"Despite this engagement, Rio Tinto has remained deeply concerned that the opposition to further uranium mining on the land of the Mirarr People, the Traditional Owners of the area, has not been appropriately recognised in any funding proposals put forward by the IBC."

Rio Tinto Chief Executive Australia Kellie Parker said: "Our utmost priority and commitment is to the rehabilitation of the Ranger Project Area in a way that is consistent with the wishes of the Mirarr People. However, given our recent dealings with the IBC and last week's release of the Grant Thornton valuation report, we do not believe that can be achieved without renewal within ERA's board.

"We thank Peter Mansell for his contribution to ERA over many years and acknowledge his efforts to find a funding solution. However, there remains a strong difference of opinion between Rio Tinto and the IBC on the terms of rehabilitation funding, with the IBC's view that successful rehabilitation could underpin potential future growth opportunities, despite the Mirarr People's long-held opposition to further uranium mining on their country."

Grant Thornton said the opposition of the traditional owners to the development of the Jabiluka site is extensively acknowledged and documented in the report. "Our report does not suggest the Traditional Owners will change their view or would provide approval," it said.

ERA said Mansell and independent non-executive directors Paul Dowd and Shane Charles (who comprise the IBC) had already advised Rio Tinto of their respective intentions to resign from the board of ERA and "Rio Tinto was aware of that position prior to its announcement" of 2 October. The company also said media reporting of the situation contained "factual inaccuracies".

Rio Tinto said it is continuing with discussions to amend an existing AUD100 million (USD65 million) credit facility to assist ERA with "immediate liquidity issues" pending the agreement of a funding solution for the rehabilitation.

More than 35 years of uranium mining and processing operations at Ranger came to an end in January 2021 on the expiry of the Ranger Authority. ERA was required to complete final rehabilitation of the project area and return the land to an environment similar to the adjacent areas the Kakadu National Park by January 2026, but forecast costs and timescales have continued to increase. Preliminary reforecasting earlier this year suggested the total cost of the rehabilitation would be AUD1.6-2.2 billion - up from AUD973 million from a 2019 feasibility study - with rehabilitation not completed until between the fourth quarter of 2027 and the fourth quarter of 2028.

Researched and written by World Nuclear News