Mineral Resources AGM: Investor showdown as Chris Ellison and board face the music over tax, governance mess
Brace yourself, Perth may have never seen an annual general meeting quite like this!
Besieged Mineral Resources founder Chris Ellison will today front angry shareholders who, over the past few weeks, have seen their investment in the lithium and iron ore miner collapse into the mud amid a wave of corporate scandals and boardroom upheaval.
From a market capitalisation of more than $9 billion, it’s dropped to $6.8b. Ouch.
If you’ve been living under a rock, let’s catch you up.
The trouble for Ellison — MinRes’ biggest shareholder and managing director — started late last month when it was revealed he’d allegedly run a tax avoidance scheme in the British Virgin Islands and profited on equipment sold to the listed mining and services group. The matter was settled some years back and outstanding tax, penalties and interest was paid under a secret deal with the Australian Taxation Office.
The billionaire expressed his “deep regret” and admitted to “a serious lapse of judgment”.
A few days later, the board of MinRes revealed that lapse formed part of a long-running probe it had already launched, with the help of outside top-tier lawyers, into Ellison’s affairs.
What followed was the release of a damning report that cost both Ellison and chair James McClements their jobs — Ellison said he’d walk within the next 12 to 18 months while Clements would vacate his post sometime before next year’s AGM.
The report, released on November 1, found “at times Mr Ellison has not acted with integrity” and he “failed to be as forthcoming with the board as he should have been”.
“The board has also concluded that Mr Ellison, on occasions, used company resources for his personal benefit.” This included directing MinRes employees to work on his boat and properties, having a company worker manage his personal finances, and using MinRes to “procure goods and services for his private use”.
Then last week came stunning revelations of a sweet commercial property deal, in which MinRes had given Ellison’s daughter Kristy-Lee Craker “rent relief” over 11 years. The company has since recovered $158,000.
Ship owners transporting the ore MinRes exports from WA were also encouraged to use a shipping agent owned by Ms Craker.
Superannuation funds invested in the miner have expressed their dismay and are asking questions about who on the board or among the C-suite ranks knew what and — more importantly — when. The corporate watchdog is now doing the same.
Now it’s the shareholders’ turn to put the blowtorch to Ellison and the directors.
Expect a few fireworks.
Stay tuned as we bring you all the news from the meeting in Lathlain as it happens.
Key Events
Just back on MinRes financial performance ...
Chief financial officer Mark Wilson dealt with market concerns about the company’s debt levels.
Mr Wilson tells shareholders it was funding the development of the Onslow Iron project just as iron prices were falling.
The project was cash flow positive for the first time last month. “Looking forward we see a clear path to de-leveraging,” he said.
He said the first tranche of a total $US3 billion ($4.6b) in fixed interest secured noted is not repayable until July 2027, two years after Onslow Iron was fully operational.
Ellison said Onslow Iron was ramping up and hailed the “huge achievement” to get an iron ore operation into MinRes “that is going to generate earnings for a long time”.
“We are focussed on the balance sheet — we are not taking our eye off that,” he said.
It’s getting heated!
First question from the floor of the AGM, and Mr McClements is still reading from prepared responses.
Second question about why shareholders were not told of Ellison’s tax scandal and related party dealings, Mr McClements goes back to prepared response that we’ve heard before.
And now the auditor is up to face the music ... and provides nothing, citing client confidentiality.
“We will not put information to the marketplace unless we understand the facts of what we are disclosing,” says McClements as Australian Shareholders Association’s John Campbell again asks why matters were not disclosed earlier.
Auditor Darren Lewson from EY says the big four accounting firm is comfortable it had full aid from board and management and stands by 2024 accounts.
No immediate departure for Ellison
Asked why Ellison was not leaving immediately, Mr McClements said: “A sudden departure was not considered in the best interests of the company.“
He added: “We have sough tto strike a balanced approach by announcing a 12 to 18-month transition. The priority is an orderly leadership transition - starting with my replacement in 2025.”
Mr McClements is addressing submitted questions, answering off prepared responses.
There’s a lot of positive things happening in the business, Mr Clements says
Ellison is wrapping up, with a final word ...
It’s all business as Ellison draws the curtain on his address.
He said Onslow Iron was a legacy he’s proud “to leave behind”.
He hints there’s other projects MinRes is looking at but suggests they could be some years away.
He’s acknowledged the anger of some shareholders but says he’s incredibly proud of what he’s achieved in the 32 years since he started the business with $10,000 in a loungeroom.
“This business will go on long down the track,” he said.
A decent round of applause as he leaves the podium.
We’re now moving onto voting, which could see a massive strike against the remuneration report for directors and top executives.
Come as you are!
There’s no real dress code for your standard corporate annual general meeting.
Societal norms might suggest you’d pair some nice shiny brouges if you plan to go the full suit option.
We salute Russell James, Ellison’s mate and the MinRes brand director, who arrived at Mineral Resourcs Park in his best AGM thongs.
All your questions answered
Mineral Resources is arguably the most talked about company in corporate Australia right now, so why is it garnering so much attention?
Here’s your must-read guide:
MinRes to launch cultural review
The miner has already said it will establish an independent ethics and governance committee in response to past governance failures exposed by an investigation probing Ellison’s tax affairs
The committee has also established new whistleblowing protocols.
And in a shock announcement, it said it has also engaged Elizabeth Broderick & Co to conduct “a confidential culture assessment among senior executive staff to identify areas for improvement”.
Ms Broderick is a former Australian Sex Discrimination Commissioner and has been reviewing progress on Rio Tinto’s cultural turnaround progam.
‘Not a good time’
Between all the carnage about MinRes’ corporate governance woes, the operational health of the business is not in tip-top shape.
The company just mothballed one of its lithium mine in the Goldfields, culling 300 jobs in the process. MinRes’ other two lithium mines in WA are also struggling amid commodity price pressures.
“Bald Hill is going into care and maintenance . . . so not quite a good time,” Ellison said.
Read more on the Bald Hill shutdown here:
Ellison’s daughter, brother could soon be cut
Mineral Resources’ ties to businesses run by Chris Ellison’s daughter and brother could soon be cut, according to the company’s outgoing chair James McClements.
Mr McClements told investors at the MinRes annual general meeting on Thursday the board will “take steps” to exit related-party arrangements that “no longer have a compelling commercial benefit for the company”.
Read the full story here:
‘A dark cloud in my life ... I hate what I’ve done’
Ellison says this is now his 19th AGM and he sees familiar faces in the audience.
He’s now taking a moment to continue after telling the audience that the past few weeks have been “a dark cloud in my life”.
“I’ve made some mistakes and I own those mistakes ... I’m deeply sorry.
“I can’t stress enough how much I hate what I’ve done.”
He’s looking more subdued than usual.
He’s just finished up with his mea culpa and now segues into more comfortable ground with a video showing MinRes’ operational achievements for the year.
On iron ore, he remains upbeat, saying he’s been through three downturns for the steel-making commodity ... and three lithium price downturns.
“Eough a downturn, we come out stronger,” he said.
Originally published on The West Australian
