Mineral Resources shares tumble on founder Chris Ellison’s offshore tax revelations

More than $1 billion has been wiped off the market value of Mineral Resources as its shares were pummelled in the wake of founder and boss Chris Ellison’s admission to a “serious lapse of judgment” over his offshore tax affairs.

Mr Ellison issued a personal statement on Sunday responding to media reports claiming the mining magnate had “evaded tax for years” by using elaborate corporate structures domiciled in the British Virgin Islands.

While saying it had “full confidence in Mr Ellison and his leadership”, the board of MinRes has hired external legal counsel to conduct an investigation.

MinRes shares tumbled more than 10 per cent in early trade amid an overall stronger market. They pushed lower to be more than 13 per cent down before staging a minor comeback to still be off 11 per cent at 2.15pm (AEDT) to $40.82.

The iron ore and lithium business listed on the Australian Securities Exchange in 2006 and has since swelled to a market capitalisation of more than $9 billion.

Mr Ellison on Sunday said the company had been established with the merger and public listing of “several private proprietary limited companies” operated by him and business partners.

“More than 20 years ago, and prior to MinRes’ listing, we also operated entities overseas for acquiring mining equipment and parts to import into Australia and on sell,” Mr Ellison said in the statement.

“Some equipment, prior to MinRes’ listing, was sold to our then-privately owned Australian businesses.

“Regrettably, revenue generated by the overseas entities that we were beneficiaries of was not disclosed to the Australian Taxation Office at that time. This was a poor decision and a serious lapse of judgment.”

Mr Ellison said he had since “voluntarily disclosed these matters to the ATO in full”.

“All outstanding tax, penalties and interest that should otherwise have been paid by me has been fully repaid, and the matter has been settled with the ATO. These circumstances have also been disclosed to the MinRes board.

“I deeply regret and apologise for these actions, and have since ensured that I have put the matter right with the ATO.”

MinRes chair James McClements said since its IPO in 2006, payments made by the company to offshore entities connected with Mr Ellison “related to pre-IPO sales contracts that were recognised as liabilities in the company’s financial statements at the time”.

“As to his private tax matters, Mr Ellison self-reported to the Australian Taxation Office, repaid amounts owed and disclosed these matters to the Board. While this does not diminish what happened, Mr Ellison profoundly regrets his errors of judgement.

“The board today comprises directors who individually and collectively have a strong focus on governance and are committed to continuous review and improvement.”