Rio Tinto won’t bail out ERA’s Ranger uranium financial mess?

Ranger-uranium-mineRio chief tight-lipped on Ranger mine, SMH April 16, 2014 – Peter Ker Rio Tinto chief executive Sam Walsh has refused to guarantee that his company will cover the cost of rehabilitating the Ranger uranium mine near Kakadu, building on uncertainty that was created last month by the Rio subsidiary in charge of the mine.

Energy Resources of Australia – which is 68 per cent owned by Rio – raised eyebrows when it revealed it may need to find new sources of money to meet its rehabilitation commitments for Ranger, which is entirely surrounded by Kakadu National Park.

Under the Ranger permit, ERA must have rehabilitated the site by 2026, and a review of the rehabilitation strategy in 2013 found the cost would be $603 million on a net present cost basis. ERA has $357 million on hand and has ceased mining at Ranger, with the company now exploring for more uranium underground in a bid to find future revenue streams.

In an unusual move, ERA appeared to link the success of that exploration project – known as Ranger 3 Deeps – to its ability to pay for the rehabilitation of the site. “If the Ranger 3 Deeps mine is not developed, in the absence of any other successful development, ERA may require an additional source of funding to fully fund the rehabilitation of the Ranger Project Area,” the company said in its annual report.Such an outcome would be unusual, as miners are typically compelled to pay for the rehabilitation at the end of a mine’s life through provisions that are made each year.

In ERA’s case, some rehabilitation is already underway and it maintains a trust with the Australian Government which was holding $63.9 million at December 31.

When asked at Tuesday night’s annual meeting of Rio shareholders in London, Mr Walsh indicated he was in no mood to pick up the tab for ERA, particularly after Rio took part in a $500 million equity raising for the company in 2011. “There was a rights issue at ERA to fund the rehabilitation work and those funds are still sitting within that business,” said Mr Walsh.

”(ERA) is a public Australian company and clearly that is an issue for them.

“We are clearly shareholders, but it’s a matter for all shareholders and a matter for the ERA board.”

Environmental sensitivities of another kind were also raised at the AGM, with Rio executives forced to defend the company’s continued involvement in coal mining.

Mr Walsh said Rio did accept that “man made emissions” were responsible for changes in the climate, but the company believed the challenge could be resolved through technological developments rather than by ceasing coal production………

Rio’s Australian AGM will take place on May 8. http://www.smh.com.au/business/mining-and-resources/rio-chief-tightlipped-on-ranger-mine-20140416-36qfi.htmlSMH 

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