Energy Resources of Australia (ERA) has provided an update regarding its proposed Interim Entitlement Offer to obtain $300 million in interim funding to continue with planned Ranger Rehabilitation works until the end of 2023.
ERA has been consulting with its three largest shareholders regarding the proposed non-underwritten, renounceable entitlement offer.
The organisation planned on using the proceeds from the Interim Entitlement Offer, together with its cash on hand, to fund the rehabilitation works for sufficient time to enable it 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 Ranger Rehabilitation Project.
However, ERA’s three largest shareholders, have made no pre-commitments to subscribe for entitlements in the Interim Entitlement Offer on the IBC proposed terms.
As a result, the IBC does not have sufficient confidence that proceeding with the Interim Entitlement Offer on the terms it had proposed will raise the necessary funds.
In declining to support the Interim Entitlement Offer at the price proposed by the IBC, leading shareholder Rio Tinto noted the lack of pre-commitment from minority shareholders.
Rio Tinto also outlined that it does not expect its investment in rehabilitation to generate financial returns, and as such it believes the offer price should reflect fair value regarding the material cost overruns and interim funding requirements and the Mirarr People’s publicly stated position on the future development of Jabiluka.
Rio Tinto has advised the IBC that its proposed offer does not reflect these factors.
The IBC has therefore determined that it will delay the launch of the Interim Entitlement Offer:
- To enable it to urgently engage an independent valuation expert to determine the fair value of ERA shares, on a basis consistent with an independent expert’s valuation prepared under Part 6A.4 of the Corporations Act and in accordance with published ASIC guidance (including Regulatory Guide 111)
- It will then determine the offer price of the Interim Entitlement Offer by reference to the fair value, as determined by the independent expert valuer
Rio Tinto has previously stated 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”.
The IBC said in a statement, “Rio Tinto 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 Tinto’s stated commitment to the completion of the Ranger Project Area rehabilitation project.
“Rio Tinto’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 has reviewed its forward cash expenditure in light of these developments and is closely monitoring its rehabilitation commitments.
The organisation said it remains committed to maintaining the current Ranger Project Area rehabilitation schedule to the extent it possibly can. As at 30 June 2022, ERA had $132 million of cash on hand (unaudited).
“ERA is mindful that, having to suspend or slow the progress of the Ranger Rehabilitation Project, will likely have detrimental impacts to the overall cost and schedule for the completion of the Ranger Rehabilitation Project,” ERA said.
“ERA reaffirms its commitment to the successful completion of the Ranger Project Area to a standard that will establish an environment similar to the adjacent Kakadu National Park.
“ERA confirms support for an ongoing commitment to the Jabiluka Long Term Care and Maintenance Agreement. The Jabiluka deposit will not be developed by ERA without the consent of the Mirarr Traditional Owners.”
ERA will advise shareholders of the terms of the proposed Interim Entitlement Offer once they are determined, which is currently expected to be in Q4 of 2022.
